Concern about consumer spending deepened on Wednesday after profit warnings from companies exposed to the slowing housing market.
Kingfisher, owner of DIY chain B&Q, blamed a 6 per cent drop in underlying sales in the first quarter on a tough retailing environment. The FTSE 100 hit a 15-week low as fears of a ripple effect from the stagnant housing market hit retailers such as Dixons.
Countrywide, the largest estate agency chain, said housing transactions in the first three months of the year were 25-30 per cent below the same period in 2004. Housebuilder Wilson Bowden called the market fickle. Both companies blamed reduced housing market activity on the election, an explanation largely dismissed by analysts. But the warnings focused attention on what kind of economy Labour might face if it wins.
Neil Austin, from KPMG Corporate Finance, said: ?It's not so much what will happen on May 5, but what will unfold in the next six months.? He added that fears about consumer spending mean banks are cautious about new issues in the retail sector and bankers are being ?more choosy? about mergers and acquisitions.
Wednesday's profit warnings came as a rise in court orders against people failing to meet mortgage payments highlighted the strain on households. Possession orders rose 20 per cent to 14,000 in the first quarter and applications by lenders rose by 25 per cent to a 10-year high.
The rise is a sign that higher interest rates have tipped some households into a debt crisis. Since the Bank of England raised the main rate to 4.75 per cent, there has been a slowdown in consumption as well as the housing market.
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