U.K. Retail Sales Volumes Deflate

U.K. retail sales fell by 0.2% in September. Monthly sales have been erratic, rising by 0.9% in August after falling by 0.8% in July.

Nominal trends- Sequentially retail sales have weakened, rising by 4.7% over 12 months and at a similar 5.1% pace over 6 months then running dead flat over 3 months. Industry sales of food, beverages & tobacco as well as clothing & footwear also have slowed, 12-months to 3-months.

In the quarter-to-date, U.K. retail sales are rising at a 1.2% annual rate. The nominal year-on-year growth rate ranked on data back to 2002 has a 75.1 percentile standing in its historic queue of data.

U.K. sales volumes- U.K. retail sales adjusted for inflation show more weakness as well as contraction in the quarter-to-date. U.K. real retail sales (sales volume) fell in September and in July just as they do for nominal sales. Sequentially retail volumes contract by 0.9% over 12 months, at a -0.8% pace over six months, and at a -6% annual rate over three months. Real retail sales are falling at a 3.1% annual rate in the just completed third quarter. The queue standing for the nominal growth rate is much stronger than the queue standing for the real growth rate; the latter stands at its 18.8 percentile, a far cry from the 75.1 percentile standing for nominal growth. Sales volumes in the U.K. are weak.

Passenger cars- Passenger car sales/registrations have been rising year-on-year for over 14 months. Even so, monthly setbacks have occurred but have been sporadic. Registrations are up at a 20% pace over three months, six months and 12 months despite weakness elsewhere in retail sales.

Survey results for retailing The CBI surveys show sales and orders rebounded in September. While both series are declining in the third quarter, the rankings are mixed. Sales for this time of year have a 77-percentile standing. However, the volume of orders year-over-year has only an 18.8 percentile standing.

Consumer confidence in the U.K. on the GfK measure edged lower in September (it has since fallen harder in October) and it has a September standing at its 31st percentile, a lower-one-third standing in its ordered queue of historic data.

Summing up On balance, U.K. retail sales trends and dynamics show sales are losing steam. Stay away from trying to evaluate nominal data since they are so distorted by inflation. The ‘real data’ show real weakness. Weak U.K. sales results are being blamed in part on warmer than seasonally-expected weather that has held up the sales of cold weather gear. But the U.K. clearly is facing real and growing sales weakness and yet inflation continues to spurt at an excessive pace. The CPIH has cooled but still runs at an annualized pace of 3.4% over three months and at a year-over-year pace of 6.4% in September. The U.K. economy looks to be struggling, but the Bank of England still has inflation work to do. It’s a difficult scenario and the outlook amid these circumstances must be guarded.