UK economic recovery is becoming curiouser and curiouser

On the one hand, the economic indicators point to further significant growth in UK gross domestic product in the final three months of this year, after rapid expansion in the previous two quarters. And consumer spending is playing a big part in this welcome, if lamentably overdue, recovery.

However, on the other hand, the retailers are sounding warnings about the outlook for consumer spending given the protracted and excruciating squeeze on household incomes.

It all seems about as coherent as the conversation at the Mad Hatter's Tea Party.

Blue-chip retailer Marks & Spencer declared this week: "While consumer confidence appears to be improving, there is little evidence as yet of this translating to increased spending in the retail sector. Given continued pressure on disposable incomes, we remain cautious about the outlook for the remainder of the year."

On October 24, Michael Sharp, chief executive of department store chain Debenhams, said: "More widely, whilst consumer confidence may be showing signs of improvement, we expect that household incomes will remain under pressure from inflation growing ahead of wages. With this in mind, we remain cautious about the strength and pace of any consumer recovery in 2014 and expect the market-place to remain highly competitive."

Justin King, chief executive of supermarket group Sainsbury, told a grocery industry conference last month: "In 12 months' time, I think we'll be sitting here saying inflation's running at about 3% and average wages have gone up about 1%. So net, on average, a couple of per cent out of people's incomes. The reality is whatever happens, I think, in the economic backdrop, we're not going to see a sea change in the amount of money that consumers have to spend."

And it's not just the retailers from which the notes of caution about the financial health of consumers are emanating.

Aberdeen-based transport company FirstGroup this week attributed continued weakness in its bus passenger numbers in Scotland partly to lower retail footfall north of the Border, compared with last year. This suggests we are not living in an environment in which happy-go-lucky consumers do not think twice about stumping up the bus fare for a trip into town to browse the latest fashions.

The Centre for Economics and Business Research (CEBR) yesterday published a relatively bullish view on the Scottish economy.

It upgraded its Scottish growth forecast for this year to 1.4%, from the 0.8% rate it had projected back in July. And it hiked its projection of 2014 expansion from 1.3% to a slightly above-trend 2.2%.

However, it acknowledged risks around the extent to which consumer spending was driving recovery.

Strathclyde University's Fraser of Allander Institute last week sounded a louder warning on the make-up of the economic recovery in Scotland and the UK as a whole, which are naturally very similar in their pattern and composition. Sustained economic recovery in Scotland is "by no means certain",it declared, with rising household spending an "unlikely basis" for durable growth.

Fraser of Allander's Professor Brian Ashcroft said: "Some households seem to be having to have recourse to cash generators, payday loan companies, and pawnbrokers. If you look at the Scottish streets, these are increasingly important (in) allowing many people to get their assets into cash very easily. To the extent that is supporting household spending, it is not going to last."

He noted that new car purchases were up but added that a "far greater proportion"were being financed by credit, with lease arrangements also common. Mr Ashcroft said this would be fine if household debt were low but highlighted the fact that it was high.

It is important, given past experience of what drives UK consumers, not to under-estimate the extent to which a housing market revival driven by state-backed schemes might be having an impact on willingness to spend.

However, this does not make the situation any more sustainable.

CEBR cited the fall in the household savings ratio as a factor which had caused it to upgrade its growth forecasts. This is hardly a good sign.

It may be the economic recovery can rebalance as it goes. However, at the moment, it is a far cry from Chancellor George Osborne's vision of "a Britain carried aloft by the march of the makers".

And, given how familiar big retailers are with their customers' moods, spending habits and incomes, we should not ignore their caution about the outlook for the consumer sector.

A third straight quarter of decent growth looks possible, on the basis of current economic indicators.

However, to quote the Mad Hatter, there remain very serious risks that this recovery will lose its "muchness", given the squeeze on household incomes and sheer scale of public spending cuts to come.