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Retail sales to cool still further after the bank holiday, says cebr

Yesterday&#39s figures for the volume of retail sales in July showed an annual growth rate of 4.5%, the lowest since January 2001, the cebr says.

This seems to be further evidence that the consumer boom, which has been largely sustaining economic growth, may be finally starting to cool off, but at least this weekend looks good for retailers, as people look to make the most of the last UK public holiday before Christmas.

The cebr predicted back in March that growth in consumer spending would ease by the end of summer, mainly due to slower growth in average earnings in the second half of the year. In addition, since then there have been large stock market falls – caused by uncertainty of the integrity of corporate accounts – which have made consumers notice that their investments are worth less than previously. This will inevitably impact upon their spending patterns.

Unlike the retail sector, the housing market hasn&#39t yet showed any sign of abating. Low interest rates have continued to sustain the astounding growth in house prices and there are no immediate prospects of a rate rise with inflation still comfortably below the 2.5% target.

The latest Halifax and Nationwide indicators have house prices growing at 20.8 and 21% respectively and the Council of Mortgage Lenders reported record lending figures this week with the news that mortgage borrowing is up 41% on this time last year.

This weekend the cebr expects to see the customary bank holiday getaway, with long queues at both at airport check in desks and on the motorways. This is a particularly important weekend for the domestic tourist industry, which this time last year was still suffering the after effects of the outbreak of foot and mouth. The weather forecast is favourable which will come as welcome news to hoteliers and other businesses that depend on tourism. International tourism has also seemingly recovered strongly following the terrorist attacks of almost a year ago.

The traditional British bank holiday activities will be ever popular, and the cebr expects that an additional £125 million could be spent on alcohol and food this weekend alone. DIY, gardening and home improvements are also popular past times and it expects £400 million to be spent on them over the weekend. So, retailers should make the most of this weekend but be aware that the consumer slowdown will continue into the autumn.

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