Shoppers rein in spending

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BRITAIN is not heading for a consumer recession, although shoppers are reining in spending as interest rates start to bite, according to a new survey published today.

The report by Verdict, the retail consultants, says talk of a high street recession is "unnecessarily alarmist", but retailers of higher ticket items such as furniture, carpets and other more expensive household goods will continue to find the going tough.

It states: "Shoppers are not slashing their spending as they did in the early 1990s. However, the memory of that recession is still fresh in people's minds so consumers are reacting with caution to current economic bad news".

The report says retail spending is still growing, but that the rate of growth has slowed. Retailers pessimism is more to do with excessive expectations and over-optimism. Too many mistook the windfall surge in spending last year as an ongoing trend rather than a one-off boost.

Verdict forecasts that real growth in consumer spending on goods will be just 2.2 per cent this year compared to the 5.2 per cent jump in 1997. With interest-rate pressure expected to ease later this year, the figure could rise to 2.6 per cent, and then above 3 per cent in the early 2000s.

The report concludes that the Bank of England's monetary policy, which reports again on interest rates this week, has done enough to cool demand.

However, the report forecasts that electrical retailers will benefit from the impact of digital technology, with a boom in demand for digital televisions, video recorders and products, such as mobile phones and personal computers where prices are falling.