GB: Retail Sales

Wed Sep 20 03:30:00 CDT 2017

Consensus Actual Previous Revised
Month over Month 0.1% 1.0% 0.3% 0.6%
Year over Year 1.2% 2.4% 1.3% 1.4%

Retail sales were surprisingly strong in August. Following an upwardly revised 0.6 percent monthly gain in July, overall purchases jumped a full 1 percent, their best performance since April, to lift annual growth from 1.4 percent to 2.4 percent. Excluding auto fuel, sales were equally robust, also rising 1.0 percent versus July to stand 2.8 percent higher on the year.

The underlying picture was almost as buoyant with non-food purchases (ex-auto fuel) increasing a monthly 0.9 percent having been only flat in July. Non-store retailing (5.0 percent), non-specialised stores (1.1 percent) and the other stores category (3.6 percent) all had an excellent month. However, there were setbacks for clothing and footwear (minus 0.2 percent) and household goods (minus 2.1 percent). Food demand advanced 0.2 percent while auto fuel was up 0.6 percent.

Meantime, inflation developments will hardly please the BoE's hawks either as the total sales deflator climbed from a 2.7 percent yearly rate to 3.2 percent. This matched its highest print since March. Excluding auto fuel, the rate was 0.2 percentage points firmer at 2.9 percent, its strongest mark since March 2012.

The unexpected strength of high street demand last month must increase the chances of Bank Rate being hiked as soon as the next BoE MPC meeting on 2nd November. The monthly data have been especially volatile of late but, with both overall and ex-auto fuel sales up a very solid 1.2 percent in the latest three months, the household sector would seem to be in pretty good shape.

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.