Trading conditions look set to worsen in the first quarter of 2008, according to the latest meeting of the KPMG/SPSL Retail Think Tank.
The most negative impact on the retail sector’s health is demand, the group reports, with sales growth continuing to decline, even though sales in value terms are expected to grow.
The group also expects non-food margins to worsen in the year ahead and that an interest rate cut will not have a positive impact on short-term demand growth.
It says consumers will continue to be hit by falling disposable income, debt concerns and uncertainty in the housing market.
Helen Dickinson of KPMG said: “The tough year in 2007 looks set to become even harder in 2008. The RTT is predicting difficult conditions ahead with a further weakening of demand growth, erosion in margins and cost inflation outstripping top line growth. Demand is the most influential variable, so with the RTT stating that this driver is experiencing the most pressure, the first quarter of 2008 looks set to be challenging, particularly in the non-food sector.”