Key market indicators

The Group tracks several market indicators from the housing, retail and construction sectors in order to determine levels of investment and inform the Group’s trading stance. Secondary housing transactions and consumer confidence remain the key indicators that most closely correlate to future performance. Traditionally there has been a lag of around six to nine months between a change in those key indicators and a corresponding uplift in demand volumes.

Lead indicators the Group tracks

The chart below demonstrates the correlation between these indicators. There is an approximate three month lag between the approval of a mortgage and subsequent housing transaction. Following the completion of a housing transaction there is a further lag of approximately six months to when expenditure on home improvement occurs.

Recent recovery in mortgage approvals; Source: Bank of England December 2014

Following the last three years of economic recovery and a relatively stable economic outlook which have been characterised by lower inflation, rising employment, low and steady interest rates and rising real wages, consumer confidence became positive on the GFK index for the first time in almost 20 years.

Recent recovery in mortgage approvals; Source: Bank of England December 2014