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Retail sales to fall in 2007 as households live off savings

Analysis

Retail sales will fall this year as households increasingly live off their savings, market research firm GfK Hungária said on Tuesday.

The 5% increase in the middle VAT rate will result in a drop in consumption, GfK's report said. The increase will have an especially significant influence on pensioners and employees who live off their monthly wages. The latter group will also be affected by an increase in employee contributions, but these effects will only be felt next year, GfK said.
Retail consumption is expected to rise by only 2% in 2006, GfK said. But hypermarkets will continue to strengthen their positions over the next few years, said the researchers. Hypermarkets currently account for around a quarter of daily staple purchases and this will rise to 28% by 2010, the report forecast.

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