British retail sales touched rock bottom lows this October in about a year. Declining employment and disposable incomes, and rising interest rates and fuel prices are responsible for this slump.
Growth of British retail sales dipped beyond expectations in October 2007 to its lowest rate in the last one year (November 2006-October 2007), but stores are still optimistic about the future, according to a study by Confederation of British Industry (CBI), as per the news published by Reuters.
In the wake of the declining disposable incomes, consumer spending has gone down due to declining employment, reduced savings, housing equity removal, and decreased discounting by retailers.
The consumers also lost their interest in going out because of the high fuel prices. People seemed lazy in going to the markets with their vehicles. They considered it better to stay back at home because things outside are not as per their expectations. The unfavorable weather has been another reason of headache for retailers. Interest rates too are unsupportive for retailers as banks have denied slashing the interest rates.
Ian McCafferty, Chief Economic Adviser at CBI, said “The pace of growth in sales has consistently slowed since the summer, showing that the five interest rate rises (Since August 2007) are having an increasing effect on momentum as shoppers tighten their belts”, as per the news published by Reuters.
Certain industry experts opined that due to the historic low of household savings, the bitter impact of the past monetary policies is still to be felt as increasing number of households would reset their finances due to stricter credit conditions.
The CBI estimates that growth in consumer spending will dip from 2.7% in 2007 to about 2% in 2008, while growth in retail sales will be 3.4% next year from 4% in 2007, as per the news published by FXstreet.
According to a Senior Research Analyst at RNCOS, “The English retail industry is going through a bad patch as it is registering loss every month, hence depressing the retailers; and there is no-one for their help, not even the government. Moreover, both banks and weather are acting against them. If the retailers want to come out of this critical situation, than they should focus more on offering value for money in this Christmas season. Also, the government and banks should think that if the spending by consumer is low, then it is of no use to increase the interest rate”.
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