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Saturday 25th of October 2008
October 23, 2008

Retail sales fall in September

by Kay Murchie

The Office for National Statistics (ONS) have revealed that High Street sales fell by 0.4% last month, taking annual growth to 1.8%, from 3.3% the previous month.

However, the September fall was less than analysts expected who had predicted a 0.9% monthly fall.

The ONS said demand for new clothes and household goods had slowed as sales of clothes, shoes and textiles fell by 2.3% while sales of household items such as fridges and furniture fell by 2%.

The credit crunch has meant that consumers are tightening their purse strings and only purchasing essential items. As a result, supermarkets continued to buck the trend as consumers are opting to stay at home, driving sales up by 0.3%.

According to Capital Economics, due to falling house prices, rising unemployment and tighter credit conditions, a much sharper slowdown is likely over the next few months.

Capital Economics expect overall real consumer spending to fall by roughly 1.5% next year, with the retail sector perhaps seeing an even sharper decline in sales.

Meanwhile, according to the latest in-depth survey of the health of the retail sector, retailers can expect a bleak Christmas.

The Retail Think Tank, made up of economists, analysts and academics and gathering information from SPSL, the footfall auditor, and industry consultant KPMG, has established that conditions in the High Street as measured by demand, margins and costs has fallen compared with this time last year.

In its Retail Health Index, where a base of 100 is taken at March 2006, the index is now reading 92 points for the third quarter of 2008 and is expected to fall to 84 in the final quarter of 2008.

According to John Dawson of Edinburgh University, the final quarter of the year will definitely be the quarter where consumers will make or break retail businesses. Mr Dawson believes that some poorly financed retailers will collapse in the coming weeks and months.

Meanwhile, Verdict, the High Street research organisation, is forecasting that this year will be the worst Christmas for stores in decades.

The news comes just one day after Mervyn King, the Bank of England’s Governor and the National Institute of Economic and Social Research said the UK economy will enter recession in 2009.

Meanwhile yesterday Prime Minister Gordon Brown also said the economic downturn is likely to cause a recession.

Earlier this week, the Ernst & Young Item Club claims that Britain is now in a recession that will last for 12 months, with only a weak recovery in 2010.

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