January 3rd, 2005
Standard & Poor's forecasts retail sales of general merchandise to increase 3.8% this year, 6.2% lower than last year, as rising interest rates and inflation are set to bite into consumer spending.
Wal-Mart is expected to continue to apply price pressure.
The percentage of disposable income that US households pay to service mortgage and consumer debt climbed to 13.32%, near its all-time high, at the end of the third quarter, according to S & P.
While energy prices are expected to ease in 2005, problems in the Middle East, or a sudden increase in demand, could push prices up.
At the top end of the retail market, luxury retailers are expected to perform well, but less strong as in 2004, as middle-income consumers will also be affected by lower stock returns from further interest rate increases.
Online sales growth is expected to continue to outperform traditional retail outlets.