Wandering round Poundland, as one does, is a bit different from the rarefied atmosphere of Davos but is an experience to be recommended.

In this Aladdin’s cave, which has everything from the latest Rupert annual, six-packs of rare incandescent light bulbs and mini tool kits to household goods, toiletries and non-perishable foods, there is a sense of wonder that anybody can make this stuff for £1, let alone sell it.

The Poundland effect underlines how tough things are for higher-priced retailers, which is why it is expanding while many of them are shrinking. That, however, is not the only message.

Just down the road is a 99p shop and, unless my eyes were deceiving me, it was busier. To economists, if not to Poundland, that is gratifying. It shows price signals work, even at low prices and that the fashionable “left digit effect” is alive and well.

This is the effect that makes us more likely to buy at £9.99 than £10. By the same token, 99p is more appealing than £1. I am tempted to open a 98p shop, though experts say that to make a real difference you might have to go to 89p, if not 49p.

The real point is that one of the stories of 2009 will be that consumers can buy cheaply, if they choose to, and not just at the discounters. We are moving into a period where inflation will be negligible, and for periods negative, in spite of sterling’s fall.

This, and what will be a very gloomy economic forecast, prompted the Bank to cut interest rates from 1.5% to 1%. As I wrote last week, I would not have done so at this time. But how strange it is that such low rates have become almost commonplace.

Low rates are providing a bonus for borrowers, bringing big reductions in mortgage payments. More generally, low inflation — helped by the government’s temporary Vat cut — will provide a boost to real income growth. Just how big was underlined by the National Institute of Economic and Social Research in its latest review.

It predicts real household disposable income will jump 3.3% this year, well up on last year’s increase of 1.5% and 2007’s zero growth. If this is right, it will be the best year for income growth since 2001. We will not have had it so good for a long time.

The question is: what will people do with it? Simon Kirby and Ray Barrell, economists at the institute, are pretty sure they will not spend it. Alongside that 3.3% rise in incomes they predict a 3.8% slump in consumer spending. Saving, not spending, will be the watchword this year, they say, with the saving ratio predicted to jump from 1.3% last year to 7.1% this year.

It is an interesting forecast and a brave one. Lots of unprecedented things are happening but that would be an unprecedented divergence between income growth and spending. Barrell points out that something similar happened in the early 1990s, but spread over three years. This time, he said, the effects were coming through much quicker, with falling housing wealth and lack of availability of credit being the two main factors pushing spending lower.

Nobody expects consumer spending to be anything other than weak this year but other economists dispute the scale of the weakness. Robert Barrie at CSFB and David Miles and Melanie Baker of Morgan Stanley think spending will slip by a modest 0.5%. The things we should most worry about said Barrie, were exports and investment.

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