Britain's consumer-led resilience in the face of global recession could be slipping, according to the latest set of retail sales figures issued by the government’s Office for National Statistics.
During March, retail sales growth slowed sharply to a marginal 0.1%, although this followed an exceptional upswing of 1.1% in February. Nevertheless, economists see the latest data as an indicator that gloomy prognostications by the Bank of England of a braking in consumer spending could prove to be correct.
But even when March’s weaker activity level is factored into the data, retail sales still rose at a lusty annual rate of 5.6%; while economists – not a breed prone to optimism – believe there is little chance that high-rolling consumers are about to curtail their spending spree.
Counsel for caution also came from another quarter - the Organisation for Economic Co-operation and Development. In its biannual World Economic Outlook, the international think-tank predicts that weaker consumer spending could hit economic growth.
Although it augurs that the UK will see GDP rise by 1.9% this year and 2.8% in 2003, these growth rates are lower than those built into the Treasury’s budget forecasts for growth. Chancellor Gordon Brown has based his budget assumptions on growth of up to 2.5% this year and 3% to 3.5% next year.
UK growth would be even slower “if the increase in house prices and household debt were to prove unsustainable ... it cannot be ruled out that house price inflation will taper off soon.”
And although the US is leading the world out of last year’s downturn, the recovery could be threatened by rising oil prices, warns the OECD. The body is also concerned that corporate profits could fall short of excessive market expectations leading to a renewed nosedive in share prices.
Data sourced from: The Times (London); additional content by WARC staff