Magazine article Marketing

Amanda Aldridge on Retail: Blame Interest Rate Rises, Not Rainwater Levels

Magazine article Marketing

Amanda Aldridge on Retail: Blame Interest Rate Rises, Not Rainwater Levels

Article excerpt

The doom-mongering headlines in recent Sunday newspapers have been enough to make you splutter over your cornflakes. The Sunday Times provided us with the wonderfully uplifting 'Armageddon August spooks the high street,' while The Observer gave us the cheery 'Shop-till-you-drop boom threatens to bust at last'.

The picture painted has been of retailers beginning to suffer from some early signs that consumers are reducing their spending. But before we go the whole hog and take these newspaper reports as gospel, it's worth reminding ourselves that the propensity for UK consumers to shop should never be underestimated.

Over the past few years a heady cocktail of the Iraq War, oil-price increases, foot and mouth, SARS and the pensions crisis has been liberally mixed with great dollops of global financial uncertainty. None of this has deterred people from carrying out the national sport of shopping for England.

The BRC-KPMG retail sales monitor has provided us with hard evidence of the country's habitual spending habits. It has revealed that total sales for each of the past five years have grown and like-for-like sales have only dipped down into negative growth territory on a couple of occasions.

There has been deflation in certain categories including electrical goods and food and clothing, and this shows that the underlying volume growth has been even stronger than the research at first suggests.

But must all good things inevitably come to an end? Well, judging by the most recent sales monitor figures, the newspapers might just be onto something this time. Like-for-like sales increased by only 0.6% for August, which is the lowest level of year-on-year increase this year.

But are we really heading for retail Armageddon as the national press suggests?

The poor weather has certainly had an effect on consumer spending this summer, but the key to the change in recent consumer sentiment has been the Bank of England's five interest rate rises over the past year. These have not helped retailers, because the UK's consumer spending spree has been partly funded by borrowing. Such has been the public's appetite for whipping out their good old credit cards that consumer debt levels have now reached an astronomical pounds 1 trillion. …

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