Retailers face a decade of challenging trading conditions, with consumer spending below pre-recessionary peaks for at least another two years and modest longer-term growth over the next decade, according to the latest Ernst & Young Item Club report.
The report forecasted a “difficult decade” as depressed wage growth and rising inflation limit consumer spending growth to just 0.6% this year, 1.3% in 2012 and 2.2% in 2013.
However, the Item Club warned that growth over the decade to 2020 is expected to average just 2% a year, down from the 3.3% rate in the decade before the recession.
It also warned that possible interest rate rises and lack of credit availability could constrain consumer spending even further.
Andrew Goodwin, Ernst & Young Item Club’s senior economic advisor, said: “The squeeze on household budgets is only going to intensify this year, as the gap between high inflation and subdued wage growth continues to widen and we experience a second consecutive year of declining disposable incomes. It will be 2013 before consumers are really able to start to enjoying the recovery.”
The warning echoes recent comments by a number of retailers, including former Asda boss Andy Bond, that the retail recession is only just beginning as consumers start to feel the impact of tax changes and VAT rises on their disposable income.