Santa’s sack may be smaller this Christmas as high street sales fall

19 November 2007
Cracks in the UK economy following the Northern Rock fiasco may be beginning to widen as high street sales start to fall. The Office for National Statistics reported a 0.1 per cent decline in the volume of sales in October for the first time in nine months.

Although there has been an obvious upheaval in the financial sector since September, particularly with regard to mortgages, loans and credit cards, people have continued to splash out in the shops. But it now appears that retail spending could be the next casualty of the crisis, as those relying on plastic begin to feel the pinch.

Expectations of a moderate sales increase for October were proved wrong, with a decline in clothing and footwear sales attributed to the unseasonably mild weather, and slowing growth in the volume of food sales believed to be the result of large price increases. The introduction of five interest rate increases since August 2006 has reduced people’s disposable income, and this is also beginning to take its toll on retail sales.

However, UK payments association, APACS, predicts that UK consumer spending on cards, cash and cheques will reach £53 billion this December compared with £50.8 billion last year, an increase of 4.2 per cent. It predicts that festive online card spending will increase by 55.6 per cent – more than £1 billion a week – in December to £5.6 billion compared with £3.6 billion last year.

Some credit card companies have introduced cash back credit cards, which may encourage people back to the high street as they search for Christmas presents, with some offering up to 4 per cent cash back. However, these deals are effective for a limited period and the cardholder will only save money if the balance is paid off in full within the statement date.

Find out more about credit cards and cash back credit cards

© Fair Investment Company