GB: Retail Sales

Thu Oct 22 03:30:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.4% 1.9% 0.2% -0.4%
Year over Year 4.8% 6.5% 3.7% 3.5%

Retailers had a much better than expected September, albeit only after a significantly weaker revised August.

Total sales were up fully 1.9 percent versus August when they fell 0.4 percent in contrast to the 0.2 percent gain originally reported. This was their sharpest increase since January 2014 and boosted annual sales growth from 3.5 percent to 6.5 percent. Excluding auto fuel, purchases were up an only slightly smaller 1.7 percent on the month and now show a yearly rise of 5.9 percent.

In practice the headline data were biased up by a particularly strong food sector where sales jumped 2.3 percent from August, in part reflecting increased consumption associated with the Rugby World Cup. Nonetheless, excluding auto fuel, non-food purchases were also robust, climbing a monthly 0.8 percent on the back of sizeable gains in household goods (4.7 percent), non-store retailing (3.4 percent) and non-specialised stores (1.7 percent). Textiles, clothing and footwear (minus 0.9 percent) and the other stores category (minus 0.6 percent) struggled. Auto fuel sales advanced 3.8 percent.

Despite the apparent buoyancy of total demand, competitiveness factors remain a major constraint on prices and the retail sales deflator (ex-auto fuel) was 2.2 percent below its level a year ago. This was its fifteenth consecutive annual decline and equalled the steepest over the period.

September's rebound boosted the 3-month change in both total and non-auto fuel retail sales from 0.5 percent to 0.9 percent. This indicates a solid upward trend in spending and may be enough to prompt some positive revisions to third quarter GDP growth forecasts. However, with prices still so soft the BoE MPC need be in no hurry to raise Bank Rate and no early move remains by far the most likely outcome.

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.