GB: Retail Sales

Thu Nov 17 03:30:00 CST 2016

Consensus Actual Previous Revised
Month over Month 0.4% 1.9% 0.0% 0.1%
Year over Year 5.3% 7.4% 4.1% 4.2%

Retailers had a bumper October. Volume sales jumped fully 1.9 percent on the month, easily beating market expectations and equalling their best performance since January's 2.3 percent leap. With September revised a tick firmer too, annual growth of purchases climbed more than 3 percentage points to some 7.4 percent, its highest mark since April 2002.

Moreover, the latest advance was broad-based with all of the major subsectors registering monthly gains. In fact, non-food sales even dwarfed the headline with a 2.8 percent spurt. Within this, clothing and footwear dominated with an increase of 4.6 percent but this essentially just reversed the cumulative drop seen in August and September and weather may well have been a factor here. Nonetheless, household goods rose 2.3 percent, non-store retailing 3.2 percent and the other stores category 3.4 percent. Non-specialised stores saw a 0.1 percent increase while auto fuel was 3.6 percent firmer.

The pick-up in purchases came despite some firming in prices as the overall sales deflator rose 0.4 percent on the month to lift annual inflation from minus 1.1 percent to minus 0.7 percent, its strongest print since July 2014. Excluding auto fuel the yearly rate was minus 1.3 percent, its highest outturn since November 2014.

October's surge in sales means that overall volumes in the latest three months were 2.0 percent above their level in May-July (ex-auto fuel 1.8 percent). This suggests that, despite some wobbles in consumer confidence since June's Brexit vote, households are in good shape. What little chance there was of additional BoE easing would seem to have disappeared completely and financial markets will now be focussed all the more on when the first monetary tightening will be delivered.

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.