GB: Retail Sales

Thu Oct 19 03:30:00 CDT 2017

Consensus Actual Previous Revised
Month over Month -0.1% -0.8% 1.0% 0.9%
Year over Year 2.1% 1.2% 2.4% 2.3%

September retail sales did little to boost the chances of the BoE hiking interest rates next month. A 0.8 percent monthly drop in volumes was the steepest since March and, following a downwardly revised 0.9 percent gain in August, reduced annual sales growth by more than a full percentage point to 1.2 percent.

Excluding auto fuel the picture was much the same with a 0.7 percent monthly decline that saw the yearly increase lowered from 2.6 percent to 1.6 percent.

In fact, the underlying position was rather worse and, ex-auto fuel, non-food purchases fell a hefty 1.5 percent versus August, their sharpest decrease in four months. Within this, other stores (minus 6.3 percent) had a particularly bad month and non-specialised stores (minus 1.1 percent) also struggled. However, it was not all bad news as household goods (3.0 percent) and non-store retailing (2.3 percent) performed very well and clothing and footwear (0.9 percent) similarly impressed. Elsewhere, food sales were off 0.6 percent and auto fuel 1.6 percent.

Part of the reason for September's reversal was probably higher prices. Hence, the annual growth of the overall sales deflator edged up from 3.2 percent to 3.3 percent, its highest mark since March 2012. Ex-auto fuel, inflation also gained a tick to 3.0 percent.

However, despite September's weakness, third quarter sales volumes were still up 0.6 percent versus the second quarter when they rose 1.1 percent. Ex-auto fuel, volumes advanced 0.9 percent after a 0.7 percent increase in the previous period.

Consequently, the implications for BoE policy are far from clear cut. The trend in household demand looks to be reasonably resilient but there are signs that rising prices and the ongoing squeeze on budgets are starting to bite. The November MPC meeting should be especially lively.

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.