Retail health shows signs of improvement

Analysts predict positive trend will continue next quarter
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The health of the retail industry improved by one point in Q1, the second quarter of growth in a row, according to the KPMG/Synovate Retail Think Tank.

The RTT revealed, however, that unlike Q4 2009, not all drivers of retail health showed improvement over the previous quarter.

The positive trend is expected to continue into the next quarter, reflected in a forecasted another one point rise in the Retail Health Index to 86, although the second half of the year remains a cause of concern to the think tank.

The RHI looks at the impact demand, margins and costs have on the health of retail.

The RTT believes stronger demand will be the key driver of improved health in quarter two. The effects of both costs and margins are forecast to be neutral.

Helen Dickinson of KPMG said: “Retailers somehow managed to navigate their way successfully through the wintry weather, the VAT rise and the economic uncertainties in quarter one.

“The big issue is whether pre-election jitters will trigger a downturn. The RTT believes there is no reason for this to happen, but it will be only a matter of time thereafter when the tough decisions on the public deficit will begin to take their toll. For example, given that none of the political parties have ruled out a rise in VAT this could impact the sector before the autumn.”

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