Retail sales are set to plunge in the next 12 months, as consumers react against rising interest rates, according to research by retail analyst Verdict.
Verdict predicts that growth in retail spending will fall from the 6.5% recorded in the last quarter of 2001 to 2.9% in the third quarter of this year.
Growth will be slow to recover in 2003, being forecast to reach 3.6% by the end of the year.
The clothing market will be amongst the hardest hit, with Verdict forecasting that growth will drop to 0% in the third quarter of this year.
Clothing will narrowly avoid recession, forecasts Verdict, with growth picking up to 2.3% at the end of 2003.
The forecast decline in the clothing market contrasts with the strong growth, of 6%, recorded in the last quarter of 2001.
The report says: “These rollercoaster patterns reflect the unwinding of the unprecedented boost to retail demand in 2001 given by last year’s aggressive interest rate cuts and explosive growth in consumer credit.
“Spending growth will slow dramatically, as interest rates look poised to rise rather than fall and as rising levels of consumer debt become unsustainable.
“A weaker housing market and declines in employment will further contribute to consumers cutting back spending.”
Verdict predicts that some retailers – including Next, Tesco, John Lewis and B&Q – will outperform their respective sectors over the next five years.
EGi News 29/01/02
