Retailers resort to price cuts as spending slows (Nov 08)

It is shaping up to be a pretty awful Christmas for retailers. Admittedly, the recent interest rate cuts and falls in petrol and food prices will provide some relief for household incomes. What’s more, the Chancellor is set to announce tax cuts for consumers in next week’s Pre-Budget Report. However, rising unemployment is still going to keep a lid on disposable income growth, while house prices are likely to fall further and credit will remain hard to get. Accordingly, we still think that spending will weaken further, dropping by some 2% in real terms next year. What’s more, we think that spending could keep falling in 2010 and even 2011.