GB: Retail Sales

Thu Nov 19 03:30:00 CST 2015

Consensus Actual Previous Revised
Month over Month -0.6% -0.6% 1.9% 1.7%
Year over Year 4.0% 3.8% 6.5% 6.2%

Following a slightly smaller revised 1.7 percent surge in September, retail sales matched expectations for a 0.6 percent monthly percent fall in October. Compared with a year ago, sales were still up a respectable 3.8 percent but this was well short of the previous period's 6.2 percent mark. Excluding auto fuel, purchases were 0.9 percent lower on the month and 3.0 percent higher versus October 2014.

A reversal in October was always on the cards in the wake of a September jump that was biased up in no small way by strong demand for food and drink associated with the Rugby World Cup. Not surprisingly therefore, England's early exit in the opening rounds saw sales at predominantly food stores contract fully 1.3 percent on the month this time. However, non-food purchases held up a good deal better although even a 0.3 percent drop here reversed much of September's 0.5 percent gain.

Weakness was particularly apparent in clothing and footwear (minus 1.8 percent), non-store retailing (minus 1.3 percent) and household goods (minus 0.8 percent). In fact with non-specialised stores also off 0.7 percent, the other stores category (1.6 percent) and auto fuel (1.7 percent) recorded the only advances.

Despite the setback, underlying trends remain positive. Hence, over the three months to October total sales advanced a solid 0.9 percent and non-auto fuel sales 0.6 percent. Excluding auto fuel, non-food purchases were a tidy 0.8 percent firmer. Nonetheless, decent consumer demand has still to put any meaningful upside pressure on prices. Thus, at minus 3.3 percent, the annual rate of the overall sales deflator was just a couple of ticks less negative than in September while the comparable ex-auto fuel rate was only a tick firmer at minus 2.1 percent.

For the BoE MPC, today's data continue to argue in favour of a steady hand on the policy tiller. The economy is doing OK and the output gap is probably closing but inflation has a long way to go before its gets anywhere near its 2 percent medium-term target.

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.