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Friday, 27 April 2012

What Does a Double Dip Recession Mean for Retail?

This week we have had the news that the UK has slipped in to a double dip recession, shrinking by 0.3 % in the last quarter of 2011 and preliminary figures suggest that the economy shrank again by 0.2 %  in the first quarter of 2012. There's no doubt times are tough and people are spending less but what does it mean for the retail sector?

Retail sales have dipped in April, and according to the CBI this is down to families cutting back on grocery shopping and big ticket items. A combination of high inflation and lack of pay rises are to blame. More retailers than not reported a decrease in sales.

A quote in the Guardian by Judith McKenna, chair of the CBI distributive trades panel and Asda's chief operating officer, said the situation on Britain's high streets remained fragile.
She said: "Consumers are still holding off from buying bigger ticket items, and opting to spend on smaller 'treat' purchases that give them a lift without breaking the budget.
"If as expected, inflation falls further later this year, we may see some growth in retail sales, but as long as high unemployment and sluggish wage growth dampen confidence, spending will remain tight."

The recession is not expected to last long according to leading economists and we are likely to return to growth almost immediately, and as is usual after recession grow between 4-5%. Most economists were not expecting us to even go in to recession but the massive decline in the construction sector had a big impact.

It looks likely according to several leading economists that it is a temporary blip and things will pick up, but some are warning that it may get worse before it gets better this year on the High Street.

What is a Recession?

A recession is two quarters of the year, back-to-back, where the size of the economy shrinks, as measured by GDP (Gross Domestic Product).

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