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.

Lead indicators the Group tracks

The chart below demonstrates the correlation between housing transactions and our General Merchant like-for-like sales growth. 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-nine months to when expenditure on home improvement occurs.

Given stamp duty changes in April 2016 it makes historical housing transaction relationship to RMI less certain.

Stamp duty changes make historical housing transactions relationship to RMI less certain

Following the economic recovery since 2013 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 in 2015.  Consumer confidence remained positive up until the EU Referendum, when it become negative and has remained below zero since.

Consumer confidence began to fall in May, with a significant reduction in June and July