UK Annual Forecasts 2012–17: Retail and the Economy
The short economic recovery following the recession came to an abrupt halt when the UK entered its longest double dip recession since the second world war. Unemployment has remained stubbornly high, while low wage growth and consumer confidence have continued to impact spending patterns. While there is light at the end of the tunnel, it remains far farther away than many first anticipated.
- Effectively plan for the future, and anticipate profit margin movement, by understanding the path for inflation over the next five years.
- Plan your growth and expansion strategy by understanding and adjusting it to the shape of the UK economic landscape over the next five years
- Anticipate a recovery in retail spending, and understand the impact of economic measures on consumer behavior, and when a positive trend will be seen
Inflation finally appears to be falling, despite a slight blip in July 2012, thanks to the VAT increase coming out of annual comparisons. While this is good news for retailers, with less pressure on input costs and consumers' wallets, there is very little growth in real incomes, meaning consumers are still finding it very difficult
Lack of demand, and little desire to sell means that the UK housing market remains weak. Average prices are 11.1% lower than before the recession in 2008, while transaction volumes remain heavily suppressed in 2012. Little activity has led to significant downward pressure on consumer spending, especially in big ticket and home related categories
While unemployment is declining in 2012, it remains stubbornly high, with little sign of relief in the near future, and we expect a lag between the economic contraction in 2012 and its impact on unemployment. Firms will avoid hiring until the outlook is considerably more positive, meaning unemployment is unlikely to fall substantially until 2015
- What is the Verdict outlook for the key economic indicators over the next five years, and what will their impact on retail spending be?
- When should I expect a recovery in the performance of the UK housing market, and thus a sustained recovery in spending on big ticket items?
- How long will unemployment remain high, and at what point will private sector firms be able to take up the slack generated by public sector job cuts?
- When will consumer attitudes shift from saving and paying down debts, to spending money on retail and services, and thus stimulating economic growth?
- Will inflation reach the 2.0% BoE target, and what will happen as a result? How long will this last, and will it stimulate a rise in interest rates?
Table of contentsOVERVIEW
Economy takes a turn for the worse and recovery will be slow and gradual
Tough year ahead following double-dip recession
Interest rates set to remain low while economy takes time to recover
Stubbornly high unemployment prevents shoppers from spending
Low wage growth restricting disposable income growth
Inflation set to continue to fall, but remains higher than wage growth
Homeowners reluctant to move continuing to halt housing recovery
Shoppers continue to build buffer to mitigate impact of future difficulties
Consumer confidence remains historically low
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Table: Principle sources of data and information
Figure: Verdict forecasting methodology
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