Over the last three months consumer confidence has continued on its upward trend and is now back around the pre-Global Financial Crisis levels. Indeed, the latest data for July shows that the confidence level has improved to 1, which is better than the long run average for this index.

Future growth in retail spending will have to be driven by more than just reductions in savings, and this means the key metric to watch at present is the growth or otherwise in real average earnings. While much political hay was made about inflation falling behind earnings in March (at least when you include bonuses in earnings), July's CPI growth of 1.6% has delayed the celebration for a little longer.

One area of spending in which we are more optimistic is where spending is linked to home moves. This obviously bodes well for retail spend on traditional retail warehouse parks. Housing transactions in the UK have picked up from their cyclical lows during the recent recession, but they remain 28% below their pre-crisis average. Savills residential research team are predicting that transactional activity will rise from just over one million moves in 2013, to 1.3 million in 2018.

There is a strong correlation between the level of housing transactions and retail spending on what we have termed "new home related goods" e.g. white goods, brown goods and carpets and an even stronger correlation between transactions and DIY spend, with spending on DIY leading a recovery in housing transactions by around a year.

These correlations sound broadly logical, with an initial pick-up in DIY spend as people prepare to sell their homes, or have just moved in, followed by a pick-up in new home related goods.

The housing market recovery is by no means going to be ubiquitous, or a steady ripple outwards from London. Our research shows that some sub-regions tend to recover much faster than their parent region, due to pools of affluence and/or confidence. Furthermore, there appear to be wide regional disparities in DIY spending, with consumers in the North West, Midlands, and South far more likely to spend higher than normal levels on DIY than those elsewhere in the country.

We expect that the steady recovery in the housing market will continue to impact positively on sales volumes of retail warehouse park goods. Indeed, our latest forecast for out-of-town sales shows stronger growth in bulky good sales than in fashion and general merchandise.

Click graph below to enlarge

Taken from
Spotlight: UK Retail Warehouse Market - September 2014