GB: Retail Sales

Thu Mar 26 04:30:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.4% 0.7% -0.3% 0.1%
Year over Year 4.7% 5.7% 5.4% 5.9%

Retail sales were significantly stronger than expected in February and that after a sizeable upward revision to the January data. Following a 0.1 percent increase at the start of the year volumes rose a solid 0.7 percent on the month, easily their best performance since November. Annual growth of purchases slipped from 5.9 percent to 5.7 percent but this simply reflected the buoyancy of demand in February 2014.

Excluding auto fuel sales were also 0.7 percent higher than in January and rose 5.1 percent on the year.

In fact, the strength of the headline figures provides a misleadingly soft picture of underlying sales as, excluding auto fuel, non-food purchases climbed a monthly 0.9 percent, easily more than reversing January's 0.4 percent drop. Within this group non-specialised stores reported a hefty 1.7 percent surge, household goods were up 1.2 percent and clothing and textiles gained 1.0 percent. Non-store retailing jumped fully 1.9 percent leaving just the other stores category (0.2 percent) to underperform. Food sales were up 0.2 percent and auto fuel 0.4 percent.

That said, the apparent robustness of consumer demand continues to have no clear impact on prices. Indeed, the total sales deflator posted a minus 3.6 percent annual rate, down from minus 3.1 percent in January and a new record low. Ex-auto fuel the rate was minus 2.0 percent after minus 1.6 percent.

The February figures put 3-month growth of total volumes at a very healthy 2.0 percent and ex-auto fuel at a still very respectable 1.5 percent. They also mean that average purchases in January/February were 1.0 percent higher than their fourth quarter mean. This suggests another sizeable contribution from household spending to real GDP growth this quarter. However, with deflationary pressures on the high street as apparent as ever, the chances of a hike in Bank Rate this year remain less than 50 percent.

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.