Christmas not as bad as feared (Jan 09)

Consumers eventually came out in force, meaning that buoyant sales around Christmas and the start of the clearance sales prevented the period from being a complete wash-out for retailers. However, there is still plenty of evidence that spending growth is still slowing. And with unemployment rising, house prices still falling and banks still restricting the supply of credit, that trend has further to run. Policymakers have stepped up a gear. But interest rate cuts have lost much of their effectiveness, while even the Government’s latest set of measures may not be enough to get the banks lending. We now expect consumer spending to fall in real terms by around 3.5% this year. However, there is perhaps now a slightly better chance of some sort of recovery in 2010 – even if that just means spending falling at a slower rate than this year.