GB: Retail Sales

Fri Feb 20 03:30:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.2% -0.3% 0.4% 0.2%
Year over Year 5.9% 5.4% 4.3% 4.0%

Retailers had a surprisingly soft start to the year. Following a smaller revised 0.2 percent rise in December sales unexpectedly fell 0.3 percent on the month in January. However, annual growth of purchases still picked up from 4.0 percent to 5.4 percent.

Excluding auto fuel volumes were down a sharper 0.7 percent versus year-end but a 4.8 percent yearly gain was also a full percentage point above the December rate.

January's monthly headline decrease reflected a 0.9 percent decline in sales of food and a 0.6 percent reversal in non-food demand, the first decline since last August. Clothing and footwear (minus 0.4 percent) and, in particular, the other stores category (minus 3.3 percent) did most of the damage and masked respectable performances in both non-specialised stores (2.7 percent) and household goods (0.5 percent). Auto fuel was up 3.0 percent.

The dip in purchases occurred despite continued weakness in prices. Indeed, the yearly change in the overall sales deflator dropped to minus 3.1 percent from minus 2.2 percent and for non-auto fuel, to minus 1.6 percent from minus 1.5 percent.

Today's results are a good deal softer than suggested by some of the surveys but the monthly sales figures are notoriously erratic. More significantly, over the latest three months total volumes were up a healthy 2.3 percent and non-auto spending 2.0 percent stronger. These figures suggest that consumer demand remains in good shape, consistent with solid employment growth and rising real wages. February will most likely see a rebound in sales but if nothing else, January's dip provides more reason for supposing that the BoE MPC will not be hiking Bank Rate any time soon.

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.