After a healthy fourth quarter of last year, British retailers now face a slowdown in consumer spending growth in 2002, according to a new report titled The Retail Rollercoaster from market research firm Verdict.
A 6.5% jump in spending in Q4 2001 will, says Verdict, slow to a 2.9% rise in the third quarter this year, before recovering slightly to 3.6% by the end of 2003.
“Spending growth will slow dramatically as interest rates look poised to rise rather than fall and as rising levels of consumer debt become unsustainable,” the firm predicted. “A weaker housing market and declines in employment will further contribute to consumers cutting back spending.”
A switch of expenditure by consumers towards leisure and services will see retail spend fall as a percentage of GDP – “This will particularly impact large ticket items which are in direct competition with leisure spending such as travel.”
The retail boom of Q4 last year was in part a reflection of the decline in travel after September 11, with expenditure switched to shopping. As this changes, sectors expected to suffer most are furniture, DIY, gardening and clothing and footwear. The latter is forecast to undergo flat growth in Q3 this year before picking up to 2.3% at the end of 2003.
News source: Financial Times