Saturday, Apr 14, 2007
Sales of Big Ticket items fall as Joe Public feels the Pinch
Times Online: High cost of living keeps old sofas in situ
Plenty of spin being used to shrug off the obvious, the decline started over Xmas, continued into the New Year with a 34% slump over previous years and now the weather is being blamed! People who can't afford a new sofa quite obviously can't afford to climb the so called property ladder. The economy is maxxed out on debt, maxxed out on tax, maxxed out on bills and there is no spare finance capacity left to push the whole lot forward, as people back off spending the rest of the economy will follow and it will hit the retail and housing sectors first.
I said in January that it would take till Easter for the evidence of a downturn to start mounting, there should be some more interesting stats coming out in the next few weeks but they will be played down.
9 Comments
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1. paul said...
I used to work in retail, and I told a department store owner in Norfolk that the housing market will pick up again when people start buying carpets again.
He agreed. That was in 2005.
2. talking rot said...
Hang on, I'm sure I read somewhere (probably The Telegraph) that business investment was picking up and had increased massively. Perhaps business investment will take over where consumer/public spending has left?
Thoughts anyone?
3. Scott said...
As people need to spend more on getting their first home, or maintaining their mortgage, they will have less to spend on what goes in the home. Perhaps companies that do DIY, kitchenware and garden goods will also be affected.
4. sovietuk said...
The situation is alot less rosy than just 3 or 4 years ago. Milllions are exposed to massive risks by carrying large debts (heavily mortgaged BTLers included) . For every bankrupt or IVA there is a massive swathe of people teetering on the edge. Turbulence in international markets and currency puts these people directly in the firing line. Just like the planet's eco-systems, very small changes in conditions create a runaway catastrophic feedback loop. We're on 5.25% rates now, it won't take much to push them over 6% - scary.
5. Fence said...
The supermarkets thoughtfully provide seats opposite the checkouts. Take one and watch. It's very illuminating. Who's spending on what, what they are buying, how are they paying for it, their expressions when presented with the bill. Food prices are taking off and we've failed to educate a whole generation on health and money. I have to say I felt very sorry when I watched one clearly concerned couple study their bill afterwards, and then very angry that the likes of this Government (politicians and servants) have done it to them with their manipulation, spins, lies, self interest, and general incompetence. Ok, it's not yet a flood but the pace is gathering. This is where the rubber hits the road and all our pontificating suddenly has a real and emotional edge. At least I feel good it pulled the right emotional levers in me. Not that I'm going to allow this goverment to exploit that like they did last time when there was (still is) a need to improve our public services. They just went on a wasteful spending spree then and I (for one) feel cheated.
6. C'mon Correction said...
Sov Uk - I agree, rates will be 5.5% within the next 2 months. If house price inflation doesn't go into reverse and start dropping now/yesterday, then 6%+ interest rates will be reality within 18 months, guaranteed. It WILL hurt anyone who has bought in the last 6 years and anyone home-owner who has MEWed recently. It's gonna to get a lot worse year on year.
7. Scott said...
6% is still affordable. The difference is trivial. To cause a crash we need at least 8% as was stated in articles months ago. Consider how high they were pushed last time to cause the previous crash. 6% is not enough.
8. enuii said...
Thinking about what people would actually cut back on after Big Ticket items the obvious one is stopping in instead of going out. It will be interesting to see how the Pub/Restuarant trade and Gym's fare over the summer months.
9. dugmug said...
Scott - rates were a lot higher than 6% when the last crash happened, that's true. But house prices are now even more in advance of wage levels than they were during the last boom, so people have borrowed more money in order to buy, which negates the difference in interest rates.
An increase of 0.25% on a £170,000 mortgage increases your monthly payments much more significantly than a 0.25% on a £80,000 mortgage. Or, put another way, the monthly repayments on £80,000 borrowed at 15% (1990 scenario) are actually the same as they are for £170,000 borrowed at 5.25% (scenario today, given "average" house costs £200,000). People will get into trouble long before your suggested 8% is reached, especially for those who've borrowed 4 or 5 times their income.