GB: Retail Sales

Thu Mar 22 04:30:00 CDT 2018

Consensus Actual Previous Revised
Month over Month 0.6% 0.8% 0.1% -0.2%
Year over Year 1.5% 1.6% 1.5%

Retailers had a slightly better than expected February. Volume sales were up a respectable 0.8 percent on the month although this needs to be seen in the context of a weaker revised January which now shows a 0.2 percent decline. Annual growth was flat at 1.5 percent.

Excluding auto fuel, purchases rose a smaller monthly 0.6 percent, also after a revised 0.2 percent drop last time.

However, discretionary spending in February was weak. Hence, excluding auto fuel, non-food sales shrank 0.8 percent on the month, more than reversing January's 0.5 percent advance. Non-specialised stores (minus 1.0 percent), textiles, clothing and footwear (minus 0.6 percent) and the other stores category (minus 2.6 percent) all struggled. The picture would have looked much worse but for sizeable gains in household goods (2.3 percent) and non-store retailing (4.6 percent). Elsewhere, food purchases were up 1.1 percent and auto fuel sales 2.5 percent.

Still, there was better news on inflation as the annual change in the overall sales deflator eased 0.3 percentage points to 2.5 percent, its second successive decrease and its weakest print since January 2017. Excluding auto fuel, prices were up 2.6 percent on the year after a 2.8 percent increase in January. This was their lowest outturn since June last year.

December's weakness (monthly minus 1.3 percent) means that the 3-monthly change in total sales slipped to minus 0.4 percent in February (ex-auto fuel minus 0.5 percent). This was the first negative posting for the trend rate since March 2017 and suggests that, while very volatile, household spending has probably cooled in recent months. As such, today's stronger than expected headline data should not increase the likelihood of a surprise interest rate hike by the BoE MPC later this morning.

Note too that the bad weather that hit much of Europe only arrived late in the month and will not have had any significant impact on the February data.

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.