GB: Retail Sales

Fri Jan 23 03:30:00 CST 2015

Consensus Actual Previous
Month over Month -1.0% 0.4% 1.6%
Year over Year 2.8% 4.3% 6.4%

Retail sales comfortably exceeded expectations in December. Despite reports of a disappointing Xmas by some of the larger stores, volumes followed November's 1.6 percent surge with a surprisingly respectable 0.4 percent monthly rise. However, with purchases up an even stronger 2.4 percent in December 2013, annual growth still dropped from 6.4 percent to 4.3 percent.

Excluding auto fuel the picture was a little softer with a 0.2 percent increase on the month reducing the yearly gain from 6.8 percent to 4.2 percent.

In fact, the buoyancy of the headline data was in large part attributable to the food sector where sales jumped a monthly 1.3 percent, their fourth consecutive advance. By contrast, excluding auto fuel, non-food demand contracted 0.6 percent, its first decline since September. Indeed, within this subsector most categories saw a drop in purchases and the overall performance would have looked a lot worse but for a 5.2 percent leap in the other stores area. Non-specialised stores saw a 4.5 percent slump, clothing and footwear was off 1.1 percent and household goods nosedived some 4.7 percent. In addition, non-store retailing was down 0.7 percent. Auto fuel sales rose 2.4 percent.

Still, for once inflation actually crept a little higher. That said, at minus 0.3 percent, up from minus 0.7 percent in November, the yearly change in the total retail sales deflator was still well below zero and so not an issue for the BoE.

December's data put the quarterly increase in retail sales at 2.3 percent, the strongest print since the three months to April 2002. This points to a sizeable contribution from overall household spending to real GDP growth and is further reason for supposing that any slowdown in economic activity at year-end was only very mild.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data include all internet business whose primary function is retailing and also cover internet sales by other British retailers, such as online sales by supermarkets, department stores and catalogue companies. Headline UK retail sales are reported in volume, not cash, terms but are available in both forms.

With consumer spending a large part of the economy, market players continually monitor spending patterns. The monthly retail sales report contains sales data in both pounds sterling and volume. UK retail sales data exclude auto sales.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.