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Dull Prospects for the US Retail Sales in 2008
Feb 29, 2008

High gasoline prices and a housing market slump have taken a toll on the retail industry in the US as consumers cut down their spending on retail products.

According to the Washington-based National Retail Federation (NRF), an industry retail group has predicted the slowest rate of increase in the US retail sales in 2008 in last six years since 2002 as cash-strapped consumers cut down spending on jewelry and electronics, as reported by
Bloomberg.

NRF expects a 3.5% increase in total retail sales in 2008 with slow pace to be witnessed in the first half of the year and bounce back in the second half, as the economy grows. Retail sales in the US took a plunge in 2007 under the impact of a major economic slowdown that hit the retail industry. The estimates from Investment Management Association (IMA) revealed a drop of almost 40% in net retail sales to a mere ₤9.5 Billion in 2007.

The primary cause for falling retail sales in the US is the rising difficulties of consumers due to rise in gasoline prices. This has negatively affected the disposable income of the US consumers, which, in turn, is stooping them from spending on retail products. Besides, the accelerating unemployment rate is also pushing the US consumers on back foot.

The difficulties the US retail industry is facing have been further compounded by the most severe housing slump in 27 years in 2007. As mortgages in the US housing market continue to rise, expenditure on retail products in the US is being directly affected. Moreover, the US housing industry is unlikely to recover this year because lenders are in no mood to reduce the mortgage rates.

However, retailers have the ability to combat the ongoing lack of attraction towards the market by effectively implementing the plans. Considering the slow growth in this sector, the US government has asked banks to cut down tax on retail products.

According to a Research Analyst at
RNCOS, “The US retail industry is suffering a setback as consumer spending has decreased, leading to losses for the retail markets. But retailers and banks together can tackle this crisis. It is necessary for the government to play its part by hiking wages along with employment in the country in order to boost retail sales.”

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