GB: Retail Sales

Thu Jun 14 03:30:00 CDT 2018

Consensus Actual Previous Revised
Month over Month 0.3% 1.3% 1.6% 1.8%
Year over Year 2.2% 3.9% 1.4%

Retailers had a surprisingly good May. Sales expanded a very solid 1.3 percent on the month, comfortably above market expectations and that after a stronger revised 1.8 percent bounce in April. Annual growth of volumes was 3.9 percent, up from 1.4 percent last time and equalling the best performance since December 2016. Excluding auto fuel, purchases also rose a monthly 1.3 percent and were 4.4 percent higher on the year.

The monthly jump in overall sales was led by food where purchases gained 1.1 percent but non-food (0.7 percent) also enjoyed a decent period. The combination of seasonably warm weather and the Royal Wedding probably provided a broad-based lift. Within the non-food sector, non-store retailing (4.5 percent) was exceptionally buoyant but clothing and footwear (1.7 percent) and non-specialised stores (0.9 percent) similarly performed well. In fact, there were no declines amongst the main subsectors. Auto fuel advanced 1.0 percent.

Average sales in April/May were fully 1.9 percent stronger than their first quarter average. This means that even a weak June is very unlikely to prevent a positive contribution to second quarter GDP growth after a negative impact in the January-March period.

Meantime, inflation developments were mixed. Hence, the yearly change in the overall deflator edged up a couple of ticks to 2.4 percent, its strongest print since February. However, this was wholly attributable to a spurt in fuel costs and, ex-auto fuel, inflation fell 0.2 percentage points to 1.8 percent, its first sub-2 percent reading since March 2017.

The BoE MPC meets next week amidst minimal expectations for any move on official interest rates. However, today's surprisingly robust retail sales report may raise a few eyebrows and would seemingly guarantee fresh calls for an immediate tightening from the two main hawks, McCafferty and Saunders. For the majority though, June data will be important to judge how much of May's jump was due to special factors. Nonetheless, the pick-up in spending last month must increase the chances of a hike in interest rates in August.

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.