High Street facing bleak Christmas
According to the latest Markit Economics survey, the UK looks set to be in for a bleak Christmas as households are squeezed amid higher consumer prices.
The survey revealed that consumers’ enthusiasm for buying “big-ticket” items has slumped to its lowest level since February 2009.
The research comes despite optimism that consumers would opt to purchase big-ticket items ahead of the VAT rise, which takes effect in January 2011.
In the meantime, Markit said its report revealed that while spending grew last month, this was because cash-strapped consumers dipped into their savings and took on their highest level of monthly debt since the survey commenced.
Commenting on its findings, Tim Moore, an economist at Markit, said: “This weakness is all the more worrying as it is reasonable to have expected spending on big ticket items to have picked up ahead of January’s VAT rise.
“As Christmas approaches, retailers will cast a nervous eye towards the ongoing weakness in household finances,” he added.
With inflation remaining stubbornly high, the cost of essentials are higher and this appears to be squeezing household finances.
Markit concludes that that the economic recovery will not be driven by consumers pending and next year’s VAT rise to 20% will only heap on the pressure on household finances.
The Office for National Statistics is due to release its second estimate for third quarter economic growth this week.
Its first estimate showed growth of 0.8% in the July to September period – this was twice the rate that analysts had expected.