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Retail sales edged up by 0.8% in December, year-on-year, according to Retail Economics. Total online retail sales rose by 45.8% year-on-year in December, value and non-seasonally adjusted, ONS. Shop price inflation dipped by 0.6% in December, excluding fuel, according to ONS. Furniture & Flooring retail sales grew by 1.2% in December year-on-year, value and non-seasonally adjusted, according to Retail Economics. Average weekly sales for Furniture & Flooring were £263m in December, according to Retail Economics.
Furniture & Flooring –Retail Economics Index: December 2020
Furniture & Flooring sales growth fell by 4.8% year-on-year in November, against a 3.3% decline a year ago, following five consecutive months of growth. Resultantly, sales growth underperformed the three-month average of 5.0%. As coronavirus cases rose, restrictions tightened across the country, culminating in the announcement of a second national lockdown (on 31st October) as we entered the… read more
Redistribution of spend
The four-week national lockdown began on 5 November, leading to the closure of non-essential retailers and hospitality sector. In the first few days of trading at least, consumers hit physical locations while able to. Springboard data suggests that shopper numbers rose by 19% week-on-week before shops shut. Notably, footfall growth in Retail Parks, where furniture retailers are typically housed, was higher than 2019 levels.
Increasing relevance of Household Income Affluence
The gap between the least and most affluent households has widened significantly as a direct consequence of the crisis. Households with higher earnings and better job security have been able to save more, hence increasing their discretionary income. An economic re-opening will see spending on high ticket items like furnishings pick-up sharply, as the third lockdown (January) would have likely created… read more
Challenging periods ahead
Looking ahead, there are clearly both push and pull factors that will impact the sector in coming months. Our recent consumer survey showed that 86% of consumers view coronavirus as either a ‘high threat’ or a ‘very high threat’ to health in the UK. Similarly, 32% of respondents said that they were somewhat unconfident concerning the easing of the third national lockdown in mid-February, while 28% of respondents said they were ‘very unconfident’ to ease lockdown measures in mid-February.
Macro Factors – Housing Market Activity
Mortgage approvals accelerated further in November to 104,969 up from 98,338 in the previous month and significantly ahead of the previous six-month average of 65,733. It was the sharpest rise in approvals since August 2007. Notably, mortgage approvals in the 11 months to November 2020 are broadly in line with the corresponding period in 2019 and are up by 61% compared to the same month a year ago. The number of re-mortgaging approvals edged up, totalling 35,107 in November.
Macro Factors – Credit and Borrowing
Annual growth in secured lending improved in November, rising by 2.9% year-on-year. The monthly change in the additional amount households borrowed totalled £5.7bn. This is the strongest amount borrowed since March 2016, higher than the £4.5bn in the previous month, and above the previous six-month average.
Macro Factors – Household Spending
Consumer spending on furnishings and household equipment rose by 18.5% on the previous quarter, amounting to £14,947m in Q3 2020. This was the largest quarterly growth in the last decade. On an annual basis, spending remained somewhat flat at 0.8% growth. This was the first positive growth rate for the sector since Q4 2018. Furniture & Furnishings, Carpets and other Flooring soared by 62.7% in Q3 2020.
Macro Factors – Consumers
Household consumption rose by 19.5% in the third quarter of 2020. The main drivers were increased spending in restaurants and hotels, and transport. Household consumption remains 9.8% below its Q4 2019 level. GfK’s Consumer Confidence measure improved by seven points to -26 in December, this is 11 points lower than a year ago. All five measures within the index increased compared to the previous… read more
Macro Factors – Ipsos Retail Performance
Footfall fell by 53.7% in December 2020 year-on-year, according to latest figures from Ipsos Retail Performance (which measures footfall in over 4,000 non-food stores across the country). The steepest declines in footfall for the month of December were in London & South East (-61.9%) followed by Scotland & N Ireland (59.2%) and The Midlands (-52.1%).
Macro Factors – Labour Market
The latest ONS labour market data shows a significant increase in unemployment rate while employment rate continues to fall. Though redundancy levels reached record highs, total hours worked increased from the low levels in the previous quarter. The number of paid employees fell by 2.7%, some 828,000 employees in December compared with February 2020 according to flash estimates using PAYE data – around 52,000 higher than in… read more
Macro Factors – Earnings
For November in nominal terms (unadjusted for price inflation): Average regular pay (excluding bonuses) for employees in Great Britain was £531 per week before tax and other deductions from pay – up from £510 per week a year earlier. Average totals pay (including bonuses) for employees in Great Britain was £562 per week before tax and other deductions from pay.
Macro Factors – Costs, Prices and Margins
Sterling’s trade weighted index dipped marginally in December, down 0.3% on the previous month as Brexit uncertainty and rising coronavirus cases impacted the index. In terms of exchange rates, the £/$ rate is currently around 1.36, while £/€ rose to around 1.12. Both commodity indexes we track appreciated in January. Indeed, the Thomson Reuters CRB Index fell by 3.9% year -on -year from -11.9% in December, compared to a 17.6% annual fall for the GSCI Commodities benchmark. The rise was driven by expectations of strong international demand during 2021.
Factory gate inflation (output) slowed in December, rising to -0.4% year-on-year from -0.6% in November. On a month-on-month basis, output inflation rose by 0.3%, unchanged from the previous month. Two product groups provided a negative contribution to the annual output inflation rate in December. Indeed, Petroleum provided the largest downward contribution of 1.53 percentage points (pp) to the annual output rate, with inflation falling by 26.6% year-on-year, driven by refined petroleum products. Paper and printing products displayed the second-largest downward… read more
Impact of the pandemic has boosted discretionary spending power disproportionately for higher earning households
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