High interest rates and rising house prices could lead to a damp Christmas for UK retailers as consumers feel the pinch, according to a report.
The report, by business advisor, BDO Stoy Hayward, shows that consumers are being forced to tighten their purse strings as other factors such as high oil prices and moderate growth in the UK export market, hamper both the manufacture and demand for goods.
The BDO output index, which gives predictions of GDP movements for the froth-coming quarter, fell by 0.2 points in November to 100.7 per cent, a figure below this years peak of 103.7 per cent in April.
These figures imply annualised growth of 2.9 per cent in the first quarter of 2005, slightly below Gordon Browns target of between 3 and 3.5 per cent, a projection that seems to belie the upbeat economic output spelt out in last Thursday’s pre-budget report.
However, the report is not all doom and gloom for businesses and claims that the slowdown is set to bottom out by the middle of 2005. Business optimism remains high and manufacturing output may improve as firms look to rebuild their stocks.
With such inflationary pressure threatening to dent business confidence, BDO expects the Bank of England’s Monetary Policy Committee (MPC) to leave interest rates on hold when it meets on 9 December.
Peter Hemington, partner at BDO, said: “The latest ‘poll of polls’ points at an economic slowdown, but firms shouldn’t panic as sunnier spells are on the horizon. The MPC’s series of short sharp shocks to the economy has created a period of caution, but the survey suggests that the economy will change gear rather than grind to a halt.”
