GB: Retail Sales

Fri Jan 19 03:30:00 CST 2018

Consensus Actual Previous Revised
Month over Month -1.0% -1.5% 1.1% 1.0%
Year over Year 2.8% 1.4% 1.6% 1.5%

Following a bumper (albeit slightly weaker revised) November, retailers saw volume sales drop by fully 1.5 percent on the month at year-end. However, with December 2016 also soft, the sharper than expected decline only shaved a tick off annual growth which now stands at 1.4 percent.

Excluding auto fuel the picture was much the same with purchases sliding a hefty 1.6 percent versus a marginally downwardly revised 1.1 percent November increase. This made for a yearly gain of 1.3 percent.

December's overall monthly decline, which will have been steepened by an unwinding of November's Black Friday boost, was roughly equally split between food (1.1 percent) and, excluding auto fuel, non-food (1.3 percent). Within the latter, household goods (minus 5.3 percent) seriously dented the cumulative 7.2 percent spurt seen over the previous three months and non-store retailing (minus 4.8 percent) fared almost as badly. With textiles and clothing off 1.0 percent and other stores 0.2 percent lower, the only rise was recorded by non-specialised stores (0.6 percent).

Price developments were also a little softer. The overall sales deflator posted a 3.1 percent annual increase, matching its November outturn, but excluding auto fuel, the rate was 2.9 percent or 0.1 percentage points below last time.

Despite December's surprisingly large setback (which the ONS acknowledged might be have been affected by unreliable seasonal adjustment factors) the trend in sales remains positive. Overall fourth quarter volumes were up 0.4 percent versus the third quarter while ex-auto fuel purchases were 0.3 percent higher. Nonetheless, these figures are well short of the 1.0 percent and 1.1 percent rates posted respectively in the three months to October. According to the latest GfK survey, consumer confidence is still falling and buying intentions are softening. As such, if the outlook for consumer spending is not negative, neither is it particularly robust. Today's data should increase the likelihood of a no-change vote at the February BoE MPC meeting.

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.