GB: Retail Sales

Thu Jul 23 03:30:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.4% -0.2% 0.2% 0.3%
Year over Year 4.9% 4.0% 4.6% 4.7%

High street spending was a good deal more sluggish than expected in June. A 0.2 percent monthly decline offset much of a marginally firmer revised 0.3 percent gain in May to reduce annual sales growth from 4.7 percent to 4.0 percent, its slowest pace since September 2014.

June's monthly reversal was only partly a reflection of weaker auto fuel purchases which dropped a slightly steeper 0.3 percent. Rather, the main downward pressure came from household goods (minus 0.9 percent) and, in particular, the other stores category (minus 3.0 percent). Excluding auto fuel, non-food sales were off 0.7 percent following a 0.4 percent contraction in mid-quarter while food purchases were down 0.3 percent after a 1.4 percent bounce last time.

Inflation developments were little changed with the implied deflator for total sales 2.9 percent weaker on the year, matching its May outturn, and ex-fuel prices 2.1 percent lower, just a 0.1 percentage point steeper decline than previously.

Despite June's setback, overall sales were still up a quarterly 0.7 percent in the period just ended, a couple of ticks short of their first quarter gain but the strongest showing since March. Core sales were 1.0 percent higher over the same period or double their first quarter rate. Accordingly the signs are that household spending made another useful contribution to real GDP growth last quarter.

However, underlying demand seems to have slowed somewhat. This may reflect the impact of May's general election but it should also offer a timely reminder to the BoE MPC's hawks that there is still no need to rush into a monetary tightening, especially with retail prices so soft.

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.