March UK Retail Sales Tank as Austerity-Fueled Double Dip Unfolds
This bodes quite ill for the United Kingdom's recovery, especially so as this report comes on the heels of official data that shows that UK GDP actually contracted in the final quarter of 2010.
Wall Street Journal
U.K. Retail Sales Plunged Last Month
LONDON-U.K. retailers suffered their worst fall in sales in at least 16 years in March, driving home the fragility of the economy at a time when the Bank of England is considering raising its key interest rate.
The dire news from retailers came a day after the International Monetary Fund cut its growth forecast for the U.K, saying Chancellor of the Exchequer George Osborne's program of spending cuts and tax increases is damaging the economic outlook.
The British Retail Consortium said Tuesday that sales fell 1.9% in March from March 2010, the fastest decline since the survey was first conducted in 1995.
The fall came even though retailers opened new stores. Same-store sales, which exclude that boost, fell 3.5%.
"This is the worst drop in total sales since we first collected these figures," said Stephen Robertson, the BRC's director-general. "This is strong evidence of the pressure customers and traders are under." ...
The data will heighten fears that consumer spending is evaporating, posing a real threat to the overall economy. Households' disposable income has been eroded by the combined impact of a high inflation rate, low wage growth and the rise in the value-added tax rate to 20%, from 17.5% at the start of this year.
"Mounting fuel and utility costs, higher VAT and the prospect of more tax rises and job losses left people unwilling to spend unless they really had to," Mr. Robertson said.
The economy shrank 0.5% from October to December and early signs are that any rebound in the first quarter will be modest at best. The BRC figure further diminishes the chances of a strong recovery...
-Related-
Wall Street Journal
U.K. Economy Shows Signs of Stress
LONDON-British workers' take-home pay fell in 2010 in the first annual decline since 1981, illustrating the strain on household budgets and casting further doubt over the prospects for the economic recovery.
Household real disposable income-income after tax and adjusted for inflation-fell 0.5% in the fourth quarter compared with a rise of 0.5% in the third quarter, the Office for National Statistics said. On an annual basis, disposable income fell by 0.8% in 2010 compared with 2009.
ONS data also showed the U.K. economy shrank slightly less than previously thought in the fourth quarter, with gross domestic product figures revised to show a contraction of 0.5% rather than the 0.6% reported earlier. But economists said the small upward revision doesn't fundamentally change the fact that the U.K. economy stalled in the fourth quarter.
Economists said the fall in 2010 disposable income doesn't augur well for this year, with the decline almost certain to continue as consumers are squeezed between inflation of 4.4%-more than twice the Bank of England's 2% target-and stagnant wage growth...
"With household consumption accounting for about 60% of GDP, this is a major downside risk to growth in 2011," he said.
U.K. consumer confidence has weakened rapidly in recent months as pessimism about job prospects and the overall economic outlook increases. The Nationwide Building Society's monthly measure of consumer confidence hit a record low earlier this month, showing that Britons are now more worried about the future than they were during the global financial crisis and the recession that followed..
Wall Street Journal
U.K. Retail Sales Plunged Last Month
LONDON-U.K. retailers suffered their worst fall in sales in at least 16 years in March, driving home the fragility of the economy at a time when the Bank of England is considering raising its key interest rate.
The dire news from retailers came a day after the International Monetary Fund cut its growth forecast for the U.K, saying Chancellor of the Exchequer George Osborne's program of spending cuts and tax increases is damaging the economic outlook.
The British Retail Consortium said Tuesday that sales fell 1.9% in March from March 2010, the fastest decline since the survey was first conducted in 1995.
The fall came even though retailers opened new stores. Same-store sales, which exclude that boost, fell 3.5%.
"This is the worst drop in total sales since we first collected these figures," said Stephen Robertson, the BRC's director-general. "This is strong evidence of the pressure customers and traders are under." ...
The data will heighten fears that consumer spending is evaporating, posing a real threat to the overall economy. Households' disposable income has been eroded by the combined impact of a high inflation rate, low wage growth and the rise in the value-added tax rate to 20%, from 17.5% at the start of this year.
"Mounting fuel and utility costs, higher VAT and the prospect of more tax rises and job losses left people unwilling to spend unless they really had to," Mr. Robertson said.
The economy shrank 0.5% from October to December and early signs are that any rebound in the first quarter will be modest at best. The BRC figure further diminishes the chances of a strong recovery...
-Related-
Wall Street Journal
U.K. Economy Shows Signs of Stress
LONDON-British workers' take-home pay fell in 2010 in the first annual decline since 1981, illustrating the strain on household budgets and casting further doubt over the prospects for the economic recovery.
Household real disposable income-income after tax and adjusted for inflation-fell 0.5% in the fourth quarter compared with a rise of 0.5% in the third quarter, the Office for National Statistics said. On an annual basis, disposable income fell by 0.8% in 2010 compared with 2009.
ONS data also showed the U.K. economy shrank slightly less than previously thought in the fourth quarter, with gross domestic product figures revised to show a contraction of 0.5% rather than the 0.6% reported earlier. But economists said the small upward revision doesn't fundamentally change the fact that the U.K. economy stalled in the fourth quarter.
Economists said the fall in 2010 disposable income doesn't augur well for this year, with the decline almost certain to continue as consumers are squeezed between inflation of 4.4%-more than twice the Bank of England's 2% target-and stagnant wage growth...
"With household consumption accounting for about 60% of GDP, this is a major downside risk to growth in 2011," he said.
U.K. consumer confidence has weakened rapidly in recent months as pessimism about job prospects and the overall economic outlook increases. The Nationwide Building Society's monthly measure of consumer confidence hit a record low earlier this month, showing that Britons are now more worried about the future than they were during the global financial crisis and the recession that followed..