Retail sales suffer ‘seasonal adjustment’

By Neil Cooper-Smith, senior analyst, Business Pilot.

December was what December normally is – a slow month for window and door sales. Leads were down 40% on November and sales were down 43%. The flip side of that is that at £6,142, average order value was up 15%.

And while a month-on-month drop of 40% in leads and 43% in sales sounds – and is – significant, the fall is consistent with a ‘normal’ seasonal adjustment.

For example, in December 2021, sales were down by 40%, going forward to record a 47% bounce in January 2022.

Tougher times may, however, be ahead.

Leads were down 4% year-on-year, and 29% on December 2020. Sales last December were down 17% on the same time in 2021 and 32% on December 2020. The market has been creeping back towards ‘normal levels of demand’, for the last 12-months or more.

We should still expect to see figures climb back in January this year after the Christmas-lull. The squeeze on household incomes and inflationary pressure, however, means that it is likely that this will be at a more modest level than in either 2021 or 2020.

The forecasts for the housing market and the wider UK economy are downbeat. The UK is widely predicted to already be in recession and the Bank of England is expected to increase the base rate further this year in the face of stubbornly high inflation.

Against this backdrop house prices are expected to suffer their biggest decline since the financial crisis with a drop of around 4%.

Even the double-digit falls predicted by the most pessimistic commentators would not wipe out the pandemic-driven increase of around 20% in house prices, since 2019.

Homeowners who purchased their properties before Covid and Stamp Duty holidays will retain equity, so will in this respect, still have cash to spend; but higher mortgage interest payments – predicted to rise on average by £3,000 this year – will lessen affordability. Inflation will also continue to limit household discretionary spend.

If you don’t already, this may make it a prudent time to add finance to your offer. Homeowners are facing a squeeze on income but higher average order values suggest that they recognise the contribution windows and doors can make in lowering their heating costs and bills.

The other silver lining in amongst an otherwise gloomy outlook for the UK economy as a whole, is that unemployment remains at historically low-levels, and while it may rise, it is forecast to do so more modestly than during past downturns.

The knowledge that their income stream is for most, protected, should give homeowners increased confidence to borrow to fund investments.

The bigger challenge may be company cash flow and bad debt. As always, those fabricators and installers that have continued to invest – and those who have close control on cash – will be better placed to ride out tougher times this year.

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