How important is housing market activity for durables spending?

Quarterly Bulletin 2005 Q2
Published on 20 June 2005

By Andrew Benito and Rob Wood of the Bank’s Structural Economic Analysis Division.

The links between the housing market and consumer spending have been the source of much debate. In this article we examine the evidence for a link between housing transactions and consumer spending, which could exist if households were more likely to purchase some goods and services when they move home. Using survey data from the British Household Panel Survey we find that households are two to three times more likely to purchase certain durable goods when they move home. But those households that move home are a small proportion of all households: so in aggregate a change in housing transactions seems likely to have only a moderate impact on durables spending. Estimates of the extent of the overall effect are, however, subject to considerable uncertainty. Furthermore, any such link can only affect spending in the short run and cannot influence consumer spending in the medium term.

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