Economy in Brief

The U.K. distributive trades picture in September shows sales compared to a year ago moving into a positive reading of +4 in September after logging a -27 reading in August – a sharp turnaround. For wholesale trades, September continues to deteriorate with the September reading on sales compared to a year ago at -8, slightly weaker than the -7 reading in August. Other retail readings are also on an improving trend in September compared to August while for wholesale trades the evidence is of deterioration in September compared to August. These two key distributive trades sectors are not moving in tandem. And that phenomenon also holds for the look-ahead survey that samples expectations for October. Expected sales volumes in retailing in October compared to September have moved up to a +5 in October compared to -17 for September; for wholesaling, the October expectation for sales compared to a year ago is -6 compared with September's expectation of +6. Other expectations for October compared to September show improvements in retailing compared to further deterioration in wholesaling, further underscoring that these two sectors are experiencing very different trends. If there is incipient strength coming to retail, it has not percolated down to wholesaling yet.

Retailing The retail readings since September show improvement in sales compared to a year ago, orders compared to a year ago, and for sales evaluated for the time of year. The stock-sales ratio also moves up in September compared to August. The rankings for these September values show that sales compared to a year ago have a 44.4 percentile standing, orders compared to a year ago have a 24.6 percentile standing, and sales for the time of year have a 36.6 percentile standing. All of these are below the 50-percentile mark and therefore all reside below their historic medians. The stock-sales ratio has 66.2 percentile standing and is above its historic median. While showing monthly improvement, retail remains weak.

Expectations for October find sales compared to a year ago, orders compared to a year ago, and sales for ‘the time of year’ all improved compared to what had been expected in September. However, only sales compared to a year ago have a net positive reading. Again, the stock-sales ratio has a positive value that moves up to a reading of 20 in October from 18 in September. The rankings for these expectations are similar to the rankings for the currently reported counterparts of these indicators. Expected sales compared to a year ago have a 40-percentile standing, expected orders compared to a year ago have a 29.1 percentile standing, and expected sales for the time of year compared to a year ago have a 29.8 percentile standing. The expected stock-sales ratio has a very high 89.5 percentile standing. The readings are not strong, but they do show improvements in September and expected improvements for October and therefore they do represent some progress. However, the absolute readings for sales and expectations both are subpar.

Wholesaling Wholesaling shows deterioration in September compared to August for sales compared to a year ago, for orders compared to a year ago, and for sales for the time of year; the stock sales ratio moves up and has a positive reading. With all negative readings up and down the line, the stock-sales ratio would seem to be indicating an undesired increase in stocks relative to sales. The rankings for these measures are weaker than the counterpart rankings for retailing. And like the retailing rankings, the rankings for the stock-sales ratio was the highest.

Looking at expectations for October, again we see deterioration for all the metrics for wholesale sales compared to a year ago, for expected orders compared to a year ago, and for expected sales for the time of year. While they all deteriorate in October compared to September, they're roughly in line with or better than the surveyed numbers that had been reported for August. Once again, the stock-sales ratio is positive and moves up in October compared to September and once again the rankings for these expected readings are weaker than the retail sales counterpart expectations for the same measures.

Since late-2022 the German GfK measure of consumer climate has improved but has been doing so very slowly and in fits and starts. Climate improved sharply from the end of 2022 until early to mid-2023 but the sharp rise did not go on for long. Afterwards some slight erosion took place. However, near the end of 2023, there was another step up as an improvement in German climate began. Since that point, confidence has remained steady in the region of about -21 or so (a weak level) in terms of the climate headline from GfK. More recently, economic expectations have logged some fresh erosion after having a similar path and moderate rebound.

Even so, the statistics on the GfK readings are clear. Climate is at the bottom 10% of all ranked historic readings. Economic expectations, income expectations, and the propensity to buy, are the three components that lag the GfK headline by a month. Their observations through September show economic expectations at a 37-percentile standing, the propensity to buy at a 30-percentile standing, and income expectations at a 44-percentile standing. Income expectations have clawed their way higher to stand near neutrality, as the median for ranked statistics -on any measure- occurs at a ranking at the 50th percentile mark. Income expectations are coming the closest to being back at neutral although they still fall short. The propensity to buy, at the 30% ranking mark, is still substantially short of neutrality, and the same is true of economic expectations with roughly a 37-percentile standing. But overall economic climate is in much worse shape than the components on the comparison of standings. The headline GfK reading is much weaker than any average of the ranking for its components. That is not unusual because historically the average component rank only explains about 60% of the variability in the ranking of climate.

GfK components The GfK components show improvement in train as of September for the propensity to buy measure and for income expectations while economic expectations are faltering and weakening. However, the GfK component improvements where they exist are only month-to-month. All three components are weaker compared to two months ago and two of three are net weaker compared to three months ago.

Elsewhere in Europe Other European confidence measures are up-to-date only through September, like the GfK components. Italy and France show solid month-to-month improvements in September confidence while the United Kingdom shows a sizeable drop in September. Over two months only France shows an improvement and over three months Italy is unchanged as France continues to show a gain and the U.K. shows a worsening. It would be hard to look at these data and find anything better than a possible spark of good news. In terms of the standing of confidence, Italy shows strong results apart from its recent trend changes with September marking an 80.5 percentile standing in its confidence measure. France has only a 43-percentile standing despite its recent gains. The U.K. is still nearly at its median level with a standing at its 49.2 percentile despite its recent sharp erosion.