Consumers prepare for the worst
Two pieces of economic news out today paint a potentially gloomy picture for the near term future of the UK retail sector.
The BRC retail figures show a distinct slowdown in sales growth, while housing data from the Royal Institution of Chartered Surveyors indicate house prices fell for the first time in a year.
“After some months of stability within the retail sector these data are a warning signal that things could be about to take a turn for the worse” comments Neil Saunders, Consulting Director of Verdict.
Verdict argues that, at the present time, the slowdown is driven by a perception by many households that their own personal circumstances will worsen over the next 12 months as government austerity measures take hold. “People are reacting to a perceived weakening of their spending power, not an actual one. However, the danger is that when budget cuts start to take hold and unemployment inevitably rises this trend could deepen and the retraction in retail spending could become significantly more pronounced” says Saunders.
At present Verdict is forecasting overall retail spending growth of an anaemic 1.6% in 2010 but warned that many home related sectors, such as furniture and electricals will fare significantly worse.
