According to a survey, retail sales plummeted in April, so much so that they hit a 10-year low and indicated the crippling effects that the stagnant housing market was having on the economy. With property price increases halted, home owners are cautious about loaning money against positive equity, which may not actually be there. More importantly, many home owners have already borrowed against the increase in the value of their property and have simply, spent up!
Economic growth appeared to dwindle as sales fell to 4.7% in April, the sharpest decrease ever since 1995, when the British Retail Consortium (BRC) started keeping records. This figure showed that the downturn in consumer confidence and consumer spending of last year had been carried forward to this year too.
High consumer confidence and expenditure levels had so far helped the country maintain 10 economically successful years, according to the BRC. However, the waning housing market along with intermittent interest rate rises in the recent years had pulled consumer demand to touch radically low levels this year.
Meanwhile, with figures showing property prices increasing at very low rates, or with a low rate of house inflation in the first three months of this year, Prime Minister, Tony Blair who was re-elected for the third term, might be asked to raise the taxes in order to offset a broadening budget deficit.
Kevin Hawkins, director-general of the BRC, said, “A slowing housing market, pre-election economic uncertainty, and the continuing threat of interest-rate rises dominated consumer confidence in April. With figures like these, it is crucial that the Bank of England consider a gradual reduction in interest rates.”
The Bank of England is expected to revise its previous domestic forecasts in view of the sliding economic development. The central bank had forecast economic growth at the rate of 2.7% in February, for this year. Thereby, it had increased the interest rate to 4.75% in August 2004.
Owner of the leading home-improvement chain, Kingfisher Plc, also registered a decrease in sales along with large consumer store groups, like Marks & Spencer Group Plc and Boots Group Plc. In fact, a photographic-equipment retailer, Jessops Plc, was also not spared as it recorded greater losses in the first-half records following the stumbling sales of digital cameras in February and March.
The BRC also attributed the slump in retail sales to the Easter holiday this year, which arrived earlier than usual although this reasoning seems very poor. A marked decrease in sales was noticed in the apparel demand in April along with footwear sales that collapsed “sharply across the board.” In addition, electronic sales appeared weak too with consumers spending significantly less on audio-visual products.
Posted
on : Sat, 14 May 2005 08:40 GMT | Business News
By : Mike Lawson
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