Spending to Decrease in the New Year

07/11/2007

Shoppers will be tightening their belts this New Year’s Eve – that’s the prediction of retail analysts Verdict Research. Although consumers are expected to spend record amounts in the run-up to Christmas, they are likely to finance their purchases with credit cards, and slow down their buying activity after the Christmas period.

The much-publicised credit crunch is driving the forecast. People who took out fixed rate mortgages two or three years ago are experiencing sharp increases in their loan costs as their discounted loan period comes to an end.

Verdict believes consumers will defer cut-backs until the New Year. Analyst Nick Gladding said: “Shoppers never want to be seen as mean at Christmas and will postpone any cut-backs until the New Year. However, having already run down their savings this year, consumers will need to rely heavily on credit to fund their seasonal generosity.”

The stretched state of consumer finances will make shoppers particularly responsive to retailers offering value, but once the New Year’s Eve celebrations are over, Verdict predicts a sharp deterioration in retailers’ trading environment. Having overspent at Christmas, consumers will be forced to reduce their expenditure.