The retail sector faces a bleak Christmas after retailers posted another set of dismal trading figures in the first half of September and the Confederation of British Industry (CBI) said it did not expect the economy to recover until autumn 2009.
Some 48 per cent of retailers reported falling sales, with just 21 per cent posting an increase for the period between 18 August and 17 September, according to the CBI's Distributive Trades Survey.
Andy Clarke, retail director at grocer Asda, said that recent credit crunch-related news, such as Lloyds TSB's rescue takeover of HBOS, underlined the volatility of the environment for consumer spending: "One of the things we are conscious of is that it feels like hurricane season. We are not sure what will turn up to affect performance. Life has changed."
However, the net balance of negative 27 per cent of retailers posting falling sales was better than the forecast of negative 42 per cent and represented an improvement on August's record low of negative 46 per cent.
The grocers helped to buoy up the overall retail sector, with 37 per cent inpositive territory, while all non-grocery retail sectors posted a decrease in sales over the period. Industry experts said retailers face a tough build-up to Christmas.
Martin Carr, senior manager of retail at accountancy firm Ernst and Young, said: "I expect to see many retailers on sales long before Christmas – by mid-December." Among the factors squeezing household expenditure, he cited falling house values.
"Over the last four to five years, retail sales have closely mapped against house prices. As house prices continue to fall, this is sending more people to the discounters, such as Primark, Aldi and Lidl," he said.
John Cridland, the CBI deputy director-general, said: "Sadly, there has been no Indian summer after the sales washout of August, and the retail outlook for early autumn remains bleak. Consumers are feeling the brunt of the economic slowdown as the UK endures what is likely to be a short and mild recession."
The CBI forecasts that a negative balance of 30 per cent of retailers will post declining sales in October. Mr Cridland said the economy had "weakened" since the Office of National Statistics said in August that economic expansion had shuddered to a halt in the second quarter. "We are predicting that the third and fourth quarter could be mildly negative." But he added: "One year from now, we ought to be seeing those shoots of recovery."
Mr Cridland said the CBI expected inflationary pressures to ease over the next few months, which should give the Bank of England some leeway to cut interest rates by 0.5 per cent in November. However, Mr Carr at Ernst and Young said many UK retailers had yet to feel the full impact of accelerating inflation, driven by Chinese wage increases and dollar strength