Spending fall triggers record deals at shops
Supermarket shoppers are being offered record levels of "two for one" and other discounts as consumer spending goes into freefall.
More than 40 per cent of all supermarket sales this week came from food, drink and other groceries that were below their normal price, the highest ever figure, according to consumer data firm Nielsen.
The price-cut blitz follows figures from top high street names showing the scale of shoppers' financial distress. Since the start of the year, inflation has risen to 4.4 per cent, while earnings are growing only by about 2.5 per cent.
John Lewis today said turnover fell 3.8 per cent last week - or 5.7 per cent when the effect of higher VAT is excluded. The flagship Oxford Street branch was one of the worst-hit, with sales down by more than 10 per cent.
Other big names to warn of falling or stuttering sales this week include Dixons, Mothercare and Laura Ashley. Wine chain Oddbins is expected to go into administration on Monday. Sainsbury's said last week that its sales were growing at just one per cent, far below City forecasts.
Some analysts believe struggling shoppers will be showered with bigger-than-usual discounts in the summer sales if confidence does not pick up. Robert Clark of the Retail Knowledge Bank said the weaker and underperforming retailers "will blink first".
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However, some experts said stronger retailers would not discount heavily because consumers are not responding even to the normal "come-ons". Jonathan Pritchard, retail analyst at Oriel Securities, said: "It doesn't matter how much they discount, people just haven't got the money. It doesn't matter if you knock off £5 or £10, if people feel they don't actually need another jumper they are not going to buy it."
In another squeeze on spending power, welfare benefits are being scaled back from today, including new ceilings on housing benefit payments for tenants in private rented homes - expected to have a big impact in London - while taxes go up next week, with new higher National Insurance.
