Economy in Brief

The Distributive Trades Sector - Distributive trades weakened in the UK in December. The responses are from a survey by the Confederation of British Industry (CBI). It logged a -32 response as an assessment of year-over-year sales in retailing in December, down from -11 in November. For wholesaling, the index for sales compared to a year ago also fell to -24 in December from -11 in November. The guidance or the estimate for sales expected in January compared to a year ago registered -41 for retail and compared to -6 in December. The same outlook for wholesaling registered a - 18 in January compared to -4 in December. Sales as evaluated in December or sales expected in January in both retailing and wholesaling show substantial weakness as well as weakening on a month-to-month basis. The picture is clear: conditions are weak; there are no caveats.

Retailing Currently reported - Looking at retailing beyond sales, orders, compared to a year-ago, register -54 in the survey for December compared to -22 for November. Sales evaluated for the time of year register -25 in December compared to -16 in November. All of these survey signals point to weakness and deepening weakness. The queue ranking of the December observations has sales at a 6.7 percentile standing, orders at a 1.4 percentile standing, and sales, adjusted for the time of year, at a 15.5 percentile standing all are extremely weak standings.

Expectations for January - I've already mentioned expected sales compared to a year ago that are sharply lower in January compared to December. Orders in January compared to a year-ago slipped a -29 reading from -26 in December, a modest weakening. Sales for the time of year weakened much more sharply in January, to - 37 from -15 in December. The rank standing of these three metrics finds sales for a year-ago in January at a 3.2 percentile standing, orders at a 7.4 percentile standing, and sales for the time of year, at a 5.3 percentile standing - all of these quite weak.

Wholesaling Current reported - As noted, wholesale sales year-on-year fell sharply in December. Wholesaling orders compared to a year-ago also fell sharply with -36 reading for December compared to -8 in November. Sales for the time of year slipped to -6 in December from +16 in November. The standings for these three metrics find sales compared to a year ago with a 9.5-percentile standing, orders compared to a year ago at a 4.2-percentile standing, while sales for the time of year at a 22.2-percentile standing.

Expected in January - As noted, wholesale sales year-on-year fell sharply in January compared to December. Orders in January, compared to a year ago, slipped to -24 from -18 in December. Sales for the time of year in January slipped to -12 from +2 in December. Each one of these is weakening month-to-month. The queue rankings for these variables show sales at a 15-percentile standing, orders compared to a year ago at a 14-percentile standing, and sales for the time of year at a 16-percentile standing. Each of these represents a clear weak standing for each respective series.

Summing up The retailing and wholesaling survey data for December and for the expectations in January can all be lumped together as data that are weak. They are data that are weakening as well. The queue percentile standings are very weak for both retailing and for wholesaling and weak for the current results as well as expected results for January.

There are in this report lots of clouds and no silver linings. Distributive trades show weakening in the behavior of the UK consumer as determined by both the retailing and wholesaling merchants contributing to these surveys. Merchants are cutting back their assessment of activity, and their expectations for the period ahead. It may be too soon to say that it is time to batten down the hatches on growth expectations, but the ranking data are extremely weak and there's nothing on the horizon to provide any stimulus to these weakening trends. Inflation is making some progress in being reduced but the Bank of England continues to be vigilant and to be engaged in inflation fighting rather than having turned to the job of growth resuscitation. That has yet to happen in the UK. Current reported weakness is not deep enough to signal recession, but that signal could yet be in the works.

The GfK survey for Germany improved to -25.1 from -27.6. It's the largest month to month rise and the climate index since May of 2023. The level of the climate index in January of 2024 at -25.1 is the strongest reading since August of 2023. The reading has a ranking in the 6.8 percentile of its ordered queue of observations, keeping it as a bottom 10 percentile reading to start the new year.

The components of the climate index, economic and income expectations, and the propensity to buy index, each improved in December. The components lag the headline by one month. The economic index rose to -0.4 in December from -2.3 in November income expectations rose to -6.9 from -16.7 in November. The propensity to buy improved to -8.8 in December from -15.0.

Economic expectations were at their strongest since July of 2023 and the same is true for expectations. However, the propensity to buy measure was last stronger back in March of 2022.

The GFK headline as well as its components show improving trends. The chart at the top shows that climate has been engaged in a climb out from a very deep negative reading that bottomed out approximately one-year ago.

The buying index is making a nice jump after a long period of flatness at lower levels. Income expectations are rising back and the neighborhood of a peak that they had seen back in July; economic expectations are making a slow climb up but are still well short of their best readings from earlier of 2023 that were experience in April. There has been some oscillation in the German economic and income expectations readings.

Other Europe Confidence measures for other European countries in the table are stronger than for Germany. Italy and France have observations that are up to date only through November. Italy and France show month-to-month improvements in November compared to October. The Italian measure has a 63-percentile standing while the French measure has a 26 percentile standing. In Italy the standing is above its historic median whereas for France the index is well below its median and barely above the lower quartile compared to historical data back to 2002. The UK has a confidence rating up to date through December. The UK reading strengthened in November and in December rising to the level of -22 and December from -24 in November and from -30 in October before that. That is nearly back to the reading of -21 from September of 2023. However, it still has an extremely low percentile ranking in it's 29th percentile stuck between the Borders of the lower quartile and the lower third of its historic range.

The GfK measure still shows a lot of weakness as the new year begins although there is a dig out in place; we can see the GfK climate measure it is gradually clawing its way to higher levels. Italian consumer confidence is the best of the lot in this table; French confidence is still weak and close to weakness we see in the UK. But in the UK at least is on a strong movement higher over the 12-months; much stronger than the gains being made by confidence in Italy and in France. However, for the most part, I characterize European confidence as weak and still challenged.