Cash-struck consumers dent recovery hopes

THE LACK of sales activity in Britain’s stores seems to be having a negative impact on levels of production in UK factories, denting hopes of an economic recovery.

News from the latest Purchasing Managers Index out today records that the index has fallen sharply to 52.1 from April’s figure of 54.4.

Forecasters were pessimistically looking for a figure of 54.2 in May, so the results were worse than anticipated. Consumer goods producers were particularly bleak with their outlooks, but no wonder given the obvious reticence of punters in our high streets to part with their money.

Over the last few weeks, we’ve seen countless retailers hatching survival plans that in many cases will involve a number of shop closures. HMV, Mothercare and JJB Sports are just a few examples, whilst other groups have fallen by the wayside. (Oddbins and Focus DIY are two that couldn’t avoid administration).

Deloitte recently produced figures showing that retail insolvencies rose by 30% in quarter 1 of 2011.

I’m in no doubt that the financial trouble on Britain’s high streets will actually get worse before it gets better. I can only hope too that the service industries and manufacturing sector can pick up in the short term to help keep UK GDP in positive territory.

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