The Retail Think Tank has revealed a new numerical metric, the Retail Health Index, following two years of outputs.
The non-partisan guide to retail sector health shows a drop this quarter by three index points to 95, the lowest since the group began deliberations in early 2006.
The RTT has also produced its worst set of predictions to date for the coming quarter. It believes the state of retail health will deteriorate in the next quarter to an RHI index of 91.
The predictions represent an accelerated rate of decline over quarter two. The projected drop is blamed on a growing deterioration in demand, rather than in margins or costs.
The board feels that fear of unemployment will have as big an impact as actual unemployment on consumer confidence and levels of demand.
The negative impact of margins is expected to match that experienced in the previous quarter.
The trend of price deflation is across the non-food sector is now expected to be at an end as retailers will have no choice but to pass on more of the price rises in their cost of sales.
The growth of costs is predicted to be marginally greater in quarter three than in quarter two as the effect of oil price rises continues to filter through.
Helen Dickinson of KPMG summarises the thoughts of the RTT: “Quarter two saw increased negative impact of demand, margins and costs; all of which are expected to worsen in quarter three.
“The choices of retailers as to how they meet these challenges are beginning to seriously narrow and we cannot currently see any light at the end of the tunnel.”