The official measure of retail sales is at least now moving in the same direction as the gloomy survey evidence. All of the main indicators therefore now show a sharp slowdown in high street demand. What’s more, the outlook has deteriorated significantly over the past month. While the Government’s bailout of the banking system means that total financial sector meltdown appears to have been avoided, it has become clear that a full recession is unavoidable. We now expect unemployment to rise to about 3m by the end of 2010 and think that house prices will have fallen by 35% by the end of 2009. Whereas previously we expected consumer spending to stagnate in real terms, we now expect it to fall by about 1.5% next year and 1% in 2010. The retail sector could see even sharper falls.
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