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Retailers' housing woe

The weak housing market is holding back retailers
March 14, 2018

Things are looking ugly for the UK’s retailers. Big names such as Maplin and Toys R Us are closing; Carpetright and Mothercare have issued profit warnings; the John Lewis Partnership has reported a big fall in profits; and others such as New Look are closing branches. Official figures next Thursday will highlight these troubles. They are expected to show that sales volumes have fallen in the past three months.

One big reason for these woes was highlighted last week, when the RICS reported that sales of houses are depressed and that estate agents have few properties on their books. I say this because weak housing transactions are bad for retailers.

History tells us this. Since the mid-1990s fluctuations in mortgage approvals have led with a lag of a few months to fluctuations in retail sales. Rising mortgage approvals in 2001, 2004, 2006, 2009 and 2013 all led to rises in retail sales a few months later, while falls in approvals in 1997, 2008 and 2012 led to falls in sales.

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