British Demand for Big Ticket Items ‘Subdued’

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May 5, 2011 by   Comments Off on British Demand for Big Ticket Items ‘Subdued’

Demand for big ticket leisure items such as caravans (RVs), sailing boats and leisure motorcycles in the United Kingdom improved in the first quarter of 2011 but growth remained extremely weak for the second successive quarter, according to data released today by GE Capital.

Sales activity grew by just 0.58% in the three months to March, following a 0.13% increase in the fourth quarter of 2010. Across Europe the GE Capital Big Ticket Leisure index rose by 3.41% in the first quarter of 2011 and remained significantly higher than UK growth for the second successive quarter (Q4 2010: 0.13% vs 9.68%).

In Europe, a return to modest growth in Q1 follows a surprisingly strong performance in the fourth quarter of 2010, which had been the second largest increase seen since the index began at the beginning of 2008, but returns the index closer to the quarterly growth rates seen in the second and third quarters of 2010. The sustained recovery that had been seen since August 2009 also looks to be losing steam across Europe as continued macro-economic concerns hit consumer confidence. Prior to August 2009, sales activity showed a sustained decline as the global recession hit hard at European consumer demand for big-ticket items.

Despite recent stagnation, UK sales activity relating to big ticket leisure items has now grown for seven straight quarters, with activity in August 2010 returning to and eclipsing levels last seen in January 2008.

The GE Capital European Big Ticket Leisure Index offers a monthly view of consumer demand for ‘discretionary’ high value leisure goods, such as motorboats and yachts through to caravans and quad bikes – using the length of time it takes for these products to sell. The Index is compiled using data from more than $4 billion of annual sales, financed by GE Capital’s distribution finance unit, from a wide range of manufacturers across the European leisure industry.

Despite slowing growth, the European index climbed to its highest level since September 2008 on the back of a sustained recovery in activity from the August 2009 low point. Activity had shown a strong recovery in the last quarter of 2010, driven by strong activity in the recreational vehicle and motorsports sectors. That growth slowed in the first three month of 2011 in the most part due to a slight overall decline in the motorsports constituent of the index being only partially offset by strong growth in the marine sector.

In the UK specifically, sales activity has struggled to remain positive over the past two quarters following four successive quarters of over 5% growth. The UK index fell in December for the first time since August 2009 and was also negative in January as cold weather and falling consumer confidence hit activity.

“For the UK, it seems that the slump in consumer confidence and GDP in the fourth quarter of 2010 and concerns around the austerity measures limiting future growth acted to subdue sales activity on big ticket leisure items. Growth has been very weak for two consecutive quarters and we are seeing monthly declines for the first time since escaping the full force of the recession in 2009,” said Stephan Caron, Commercial Leader at GE Capital UK. “What’s positive, however, is that activity is still growing and that we are now above levels of activity seen in early 2008.”

GE Capital is uniquely placed to develop this indicative index as the company is a leading provider of asset finance, inventory finance and working capital/cash flow financing to manufacturers and dealers across Europe.

“As a leading European market player in distribution finance, which provides manufacturers with working capital secured against finished goods from the moment they leave the production line through the dealer network until sale to the end customer, we have a unique insight into the activity of both manufacturers and dealers across a wide range of industries,” said Caron, “We have worked hard to develop intelligent process technology that is embedded into our customer systems and gives them a real-time view of which products are selling, in which countries and through which dealers. These systems also give us a fantastic macro view of economic activity and we’ve used these to build the index.

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