Retailers face hit as sentiment falls to new low

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Consumer confidence has plummeted to an all-time low, sending retailers an ominous signal for the remainder of 2008, according to the British Retail Consortium.

The Nielsen/BRC UK Consumer Confidence index has tumbled to 79, compared with 91 – which was the lowest score since the survey began in 2003 – this time last year.

Mike Watkins, senior manager of retailer services at Nielsen, said: "The fact that the score has plummeted a further 12 points is telling us how much consumers are being stretched."

He attributed the falling confidence to increasingly negative consumer sentiment about job prospects, personal finances and personal spending power. Sixty per cent of people polled said that they thought their job prospects were either not so good or bad, compared with 50 per cent in 2007, while 57 per cent described their personal finances in the same gloomy way.

BRC director general Stephen Robertson said: "With one in five people saying they have no spare cash, the highest ever recorded by this survey, customers are telling us they are cutting back on spending on all sorts of non-essentials. Clothes, footwear, furniture and new technology are the biggest casualties as consumers attempt to manage their money. It's clear we are seeing the effects of customers' concerns about the future and about their own levels of debt."

The survey found that 55 per cent of British consumers said inflation was their main concern during a period of economic downturn, while 39 per cent cited high interest rates.

Seymour Pierce analyst Freddie George said: "I think sales will continue on a downward trend until interest rates are lowered."

Tomorrow, the BRC will unveil its retail sales figures for May, which are expected to reinforce the gloom enveloping the sector. In April, retail like-for-like sales fell by 1.5 per cent – the first time since 2005 that year-on-year comparable store sales fell two months in a row.

The BRC reported that price inflation rose by a robust 1.8 per cent in May, primarily driven by a soaring 6 per cent uplift in food for the month.

Pali International analyst Nick Bubb said that rising inflation would put increased pressure on gross margins for both food and non-food retailers.