August 28, 2007

Retailers to face quieter Christmas?

Recent hikes in food prices are likely to have a knock on effect on the CPI, raising inflation - and the prospect of a quieter Christmas this year for retailers.

Heavy flooding across major food producers, affecting everything from wheat to garden vegetables, coupled with rising demand from Asia, means that basic agricultural products are seeing record prices.

In addition, this is having a knock-on effect on dairy and meat production prices.

The danger is that food inflation alone will make wallets tighter in the busiest shopping period of the year.

Additionally, any rise in overall inflation is likely to encourage the bank of England to raise interest rates later in the year, potentially having an even worse impact on consumer spending.

Of course, the Bank of England has been seriously lax with inflation, missing targets for most of the past year. Therefore we may see any inevitable interest rate hikes reserved for early 2008.

Either way, the outlook isn’t good for the consumer, especially as last Christmas saw poor sales performance, even with lower interest rates.

Source [Page2go2]

Filed Under Money