GB: Retail Sales

Thu Oct 20 03:30:00 CDT 2016

Consensus Actual Previous Revised
Month over Month 0.2% 0.0% -0.2%
Year over Year 4.5% 4.1% 6.2% 6.6%

Retail sales were softer than expected in September. An unchanged level of purchases versus August saw annual growth slide from an upwardly revised 6.6 percent in mid-quarter to 4.1 percent. Excluding auto fuel, sales were similarly flat on the month and 4.0 percent above their level a year ago, down from 6.2 percent last time.

September's headline stagnation masked a 0.2 percent monthly decline in ex-auto fuel non-food demand, its second consecutive drop albeit after a 3.6 percent leap in July. Within this, weakness was most apparent in clothing and footwear (minus 2.8 percent) where seasonably warm weather probably had a detrimental impact. The other stores category (minus 0.7 percent) also had a poor month but there were decent performances by household goods (3.7 percent) and non-store retailing. Foods sales were off 0.2 percent while auto fuel was flat.

For once, prices were relatively firm. The overall sales deflator posted an unadjusted monthly rise of 0.9 percent, enough to lift the yearly inflation rate from minus 1.9 percent to minus 1.1 percent, its strongest reading since August 2014 and indicative of some early impact of sterling depreciation. Excluding auto fuel the annual rate climbed from minus 1.8 percent to minus 1.4 percent, its highest print since December 2014.

Despite the relative softness of August and September, total retail sales in the third quarter were still up a solid 1.8 percent versus April-June (ditto ex-auto fuel), their sharpest quarterly rise since the fourth quarter of 2014. This will add 0.1 percentage points to GDP growth. Consumer confidence has fallen since the Brexit vote and clearly the risk is that this translates into weaker household spending over coming months, especially as inflation climbs. However, third quarter GDP still looks likely to have held up pretty well and today's data leave another BoE ease next month finely balanced.

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. The data are derived from a monthly survey of 5,000 businesses in Great Britain. The sample represents the whole retail sector and includes the 900 largest retailers and a representative panel of smaller businesses, including internet sales. Collectively, all of these businesses cover approximately 90 percent of the retail industry in terms of turnover.

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.