UK Retail Sales are strong again posing questions for the CBI and BRC

We find ourselves advancing today on what is the strengths of the UK economy which is retail sales. These have consistently supported economic output and GDP ( Gross Domestic Product). However there is an undercut to this as our propensity to consume is a major factor in our persistent balance of trade deficits. It is also one of the factors that gets forgotten when this tune starts up and people get the vapors because it is an area where we are different.

I’m turning Japanese, I think I’m turning Japanese, I really think so
Turning Japanese, I think I’m turning Japanese, I really think so
I’m turning Japanese, I think I’m turning Japanese, I really think so
Turning Japanese, I think I’m turning Japanese, I really think so

British Retail Consortium

This has played a rather different tune to the official data as these excerpts from its prices report show.

Shop prices fell by 0.6% on the previous year as low consumer demand and stiff competition continued to push down prices…….While consumers may welcome lower prices, falling consumer demand is squeezing retailers’ already tight margins.

Their volume data has been weak for some time.

Unsurprisingly September proved to be another difficult month for retailers, with like-for-like sales declining by 1.7 per cent compared to last year. Worryingly, even online sales moved closer to stalling, with growth of non-food online sales only 0.7 per cent.

“Ongoing Brexit uncertainty is clearly having a material impact on the consumer psyche, with all but one non-food category being in decline in September. Consumers are choosing to focus on the essentials, with food one of the few categories delivering growth.

The trouble is that they have ended up looking like they have experienced a set of bum notes as the official data has turned out to be pretty good. Indeed frankly there has been no relation between the two at all.


The Confederation of British Industry has been sending out an SOS for some time now.

Retail sales volumes in the year to September fell for the fifth consecutive month, albeit at a slower pace than the previous month, according to the latest CBI Distributive Trades Survey. Retailers expect the contraction in sales volumes to ease further in October.

There is a particular subject they seem obsessed with.

Five successive months of falling volumes tells its own story about the tough conditions retailers are having to operate in. Add to this the pressures of Sterling depreciation and the need to plan for potential tariffs and supply issues in the event of a no-deal Brexit and you get a gloomy picture for the sector.

The media have often joined in with this gloomy view but have regularly found themselves crossing their fingers that their readers,listeners and viewers have forgotten this when the official data is released. I fear that the British Retail Consortium and the CBI are imposing their own views on a particular issue onto the data rather than just letting the numbers speak for themselves.

Today’s Data

At first it might appear odd that this was a good number.

The quantity bought was flat (0.0%) in September 2019 when compared with the previous month, following a fall of 0.3% in August 2019.

There is the improvement from last month’s fall but there is also the fact that September last year was a particularly weak number where the index fell from 106.2 to 105.4 so if we switch to an annual comparison we see a strengthening of the position.

The year-on-year growth rate shows that the quantity bought in September 2019 increased by 3.1%, with growth across all sectors except department stores and household goods.

If we look at the picture we see that pretty much everywhere is strong but particularly non-retail and food.

In September 2019, all four main sectors contributed positively to the amount spent and quantity bought, resulting in a year-on-year growth of 3.4 and 3.1 percentage points respectively.

Non-store retailing provided the largest contribution to the growth in the quantity bought at 1.4 percentage points. Food stores reported the largest contribution to the amount spent at 1.5 percentage points in September 2019.

The Recent Trend

There have always been issues with monthly retail sales data being erratic and the modern era with the development of Black Friday and Amazon sales days have made that worse. Thus we get the best idea from the three month average.

In the three months to September 2019, moderate growth in the quantity bought continued at 0.6% when compared with the previous three months, with all sectors within non-food stores reporting declines except “other stores”.

That may be moderate growth for retail sales but we would be happy indeed if all the other areas of the economy managed it! As to the detail we are told this.

Non-store retailing showed strong growth at 4.3%; this includes a strong monthly growth in July 2019 of 6.9% with summer promotions boosting sales more than usual in this month. Food stores also reported a growth in the three-month on three-month movement; this follows three previous months of decline in the three-month on three-month growth rate.

I am afraid that one sector seems locked into decline though.

Department stores continued the ongoing decline in the three-month on three-month movement resulting in 13 consecutive months of no growth in this sector.

Online Sales

These continue to strengthen overall.

Internet sales increased by 9.1% for the amount spent in September 2019 when compared with September 2018, with all sectors reporting growths except department stores.

However the monthly numbers like elsewhere are erratic.

In contrast, internet sales fell on the month by 2.0% when compared with August 2019.

It seems that department stores cannot buy a break as I note that their online sales over the past year have fallen by 3.6%


We are seeing yet more confirmation of the theme that I established on the 29th of January 2015.

 However if we look at the retail-sectors in the UK,Spain and Ireland we see that price falls are so far being accompanied by volume gains and as it happens by strong volume gains. This could not contradict conventional economic theory much more clearly. If the history of the credit crunch is any guide many will try to ignore reality and instead cling to their prized and pet theories but I prefer reality ever time.

Actually we have shifted from absolute price falls to relative ones as inflation in this area which has been around 0.3% is far lower than wage growth, So we have real wage growth of over 3% which is boosting retail sales. Ironically the British Retail Consortium think this impact may be even stronger.

September Shop Prices fell by 0.6% compared to a 0.4% decrease in August. This is the highest rate of decline since May 2018…..Non-Food prices fell by 1.7% in September compared to August’s decrease of 1.5%. It is the highest rate of decline since May 2018.

So according to their numbers relative real wages are surging but as to the consequences well Kim Syms got it right I think.

Too blind to see it
Too blind to see what you were doing
Too blind to see it
Too blind to see what you were doing.

As to the wider issue these numbers move the UK further away from a recession as they suggest a small ( 0.03%) boost on a quarterly basis and a stronger annual one.

Meanwhile in other news Bank of England Governor Mark Carney has flown all the way to Boston in the United States to lecture us all on climate change.

Asked about his views on climate change and potential divestments from fossil fuel firms, Carney said a more effective approach would be to help companies, including automakers and energy producers, move to lower emissions.

“It’s not just about divestment,” he said. Better, he said, would be “to put capital into an energy company, that’s going from oil-and-coal heavy to a renewable mix, that they wouldn’t otherwise do if they didn’t get the capital.” ( Reuters)

He did however find time to remind us that his priority remains The Precious! The Precious!

Carney said the British central bank would probably cut the countercyclical capital buffer that it sets for banks to zero, from 1% now, if the economy – which faces the prospect of a no-deal Brexit shock – took a hit.

The Investing Channel



16 thoughts on “UK Retail Sales are strong again posing questions for the CBI and BRC

  1. Shaun,
    There are a few issues which I think are important:

    As you picked up in todays blog, non food retail is in decline and as such Joe public is being more careful on discretionary spend.

    However City Am suggest there has been stock-piling by retailers

    “Food shops bounced back after a weak few months, but there was yet more bad news for department stores with sales continuing to fall in September.”

    Duncan Brewer, retail expert and partner at consultancy Oliver Wyman, said the growth in sales over the last three months “is despite the turbulent times and uncertain future”.

    “It appears that consumers are starting to stockpile in anticipation of a no-deal Brexit,” he said.
    “We expect consumers to tighten their purse strings in the coming months. Our research shows that households will be worse off by £810 annually in the case of a no-deal Brexit.”

    Some proof of stockpiling and buying now prior to Christmas are the latest John Lewis weekly sales the last 2 weeks both up in double digits due in part to “event” sales. Week 36 a bonanza week:

    Week 36 JL (excluding Waitrose) 23.1% !!!
    Week 37 JL (excluding Waitrose) 11.9%

    Overview and conclusion:

    I think you are correct retail sales will add a small amount to GDP and on the face of it core retail sales look reasonable but if Joe public has been stock-piling retail sales may falter going forward.

    Trump tariffs yet to kick in there will be tariffs on clothes imported from the US albeit I suspect that will make little difference but may have added to stock-piling the last month.

    Retail sales came in less than a poll by Reuters however.

    • The £ been all over the place today up against the $ at the moment but down on the euro, the latter more likely due to the market sceptical on deal being approved by the government, the DUP said they would reject the deal.

      • Hi Peter

        I have struggled to take Oliver Wyman seriously since they announced this.

        “It has long been known that consulting firm Oliver Wyman crowned Anglo Irish the world’s best bank in 2006 — just when Anglo was actually… well, you know the story.

        Sadly, the report that bestowed this fateful distinction has (quite unaccountably!) vanished from the Oliver Wyman corporate site.

        Consequently, it’s acquired somewhat mythical status: we heard it appeared recently on Scribd, but it’s not there now, either.”

        It gets better.

        “Anglo Irish Bank owes much of its success to a concentrated focus on business lending, treasury and wealth management in the Irish, UK and US markets. Business lending, its largest and most profitable segment, has grown by 38 % annually over the last 10 years. A centralized loan approval process has helped the bank maintain high asset quality and minimize the risks of portfolio concentration. In addition, the bank has exploited synergies among its narrow business mix to achieve a low cost-income ratio of 27 %, providing a strong foundation for organic growth…

        (Anglo 2010 loss: €17.6bn)”

        As to the future then the three month average suggests some slowing for retail sales. But as we stand they are supporting the UK GDP growth rate.

  2. Hello Shaun,

    Again Mark reminds us that the job at the BoE is more political than financial and thus should be subject to a people’s vote , ie an elected position .

    if by chance that happens and you run, I’d vote for you !


  3. Hi Shaun

    Its intresting to note that Carnage is considering offering tax payers money to the car industry. The car industry is on its knees at the moment. Fraud, dieselgate, PCP miselling and Tesla leading the way. Their electric car offerings are miles behind Tesla, and the investment needed will cost tens, if not hundreds of billions.

    Its only a matter of time before the car companies go cap in hand to the state for free money to compete against Tesla.

    The luxury car market is being hammered by Tesla in the US. I’ve noticed over here that a 1 year old BMW X6 (60k new) can be had be had for 35k. Massive depreciation.

    Maybe the next tranch of QE will be directed towards the car industry. So much for the free market…

    • I’d say it will be to the Banks who lent the money not the car industry per se


      PS: yes another bail out or bail in by the tax payer !!

  4. September sales are always lower. New school uniform has been bought already and most people are trying to save money after having spent too much during the summer holiday period.

    It will be interesting to see if the environmental mantra of consume less to save the planet actually has some effect or if we continue spending like there is no tomorrow.

    John Lewis is really relying on Waitrose now which is still making money. I haven’t shopped in any department store in years and I used to frequent John Lewis a lot. These days it seems so much effort to have to hunt through a store to find what you want and then find they are out of stock. I’ve lost count of the things I’ve tryied to get in John Lewis and ended up getting from Argos.

    I am also very curious to see how the IR35 situation changes house prices over the next 6 months to 1 year especially in London. A lot of contractors haven’t really twigged yet that their take home pay will go down. There is no way that businesses can afford to simply pay them 30 percent more so a lot of well paid people are going to have a pay cut and may have to reduce spending on rent or mortgages.

    • John Lewis is indeed struggling and they are having to rely on their own brands more and more and ditching over brands as they cannot make money on the price match.

  5. Shaun,

    With recent news on retail sales, wage rises and also inflation, any thoughts on report on hidden unemployment which suggests the real figure 3 million higher?

    If this is right the UK economy could run at a faster rate if the uneconomic inactive were placed in the workforce. However some will be staying at home looking after elderly and the infirm and presumably some will be looking to supplement their income selling drugs and involved in crime, so it would not be easy to deal with in any event.

    It is an interesting study however and not the first time a similar study been done the same way. I think what it does suggest however is the official data from the ONS misleading.

    • Hi Peter

      Thanks for the link as I enjoy those so let’s break it down.

      “The adjusted rate accounts for inactive people who may be willing to work or have stopped looking for work for economic reasons; such as people with health issues or a disability who could work with support, those who take care of relatives due to a lack of access to care facilities, people who have taken early retirement, and people who think there are no available jobs.”

      Maybe the sick or disabled could work but there are 2 issues. One would it influence their problems? And two that suitable jobs may be nowhere near them.

      As to those who take care of relatives I can answer from personal experience as I looked after my father when he was dying of lung cancer. Some things were possible as I did this blog because I could do it sitting in his room. But I could not go out much at all unless someone else was around.

      It is not clear to my that early retirement counts although that is a complex issue as my official one has gone from 65 to 67 in my working life.

      So moving from their Ivory Tower world to the real one the numbers thin out quite a bit. I am sure there is hidden unemployment just not that much.

  6. Great blog and video as usual, Shaun.
    Regarding cauliflower prices mentioned at the beginning of your video, the RPI series for cauliflower to date supports your view that there has been no catastrophic increase in cauliflower prices, although the prices shown are quite a bit higher than what you paid. In April the average price per head was 100 pence, which rose to 105 pence in August and 108 pence in September. It shows the absurdity of the current stance of the ONS regarding the RPI that this is, as far as I know, their only published series regarding cauliflower, but it doesn’t incorporate the new twice a month pricing that has been instituted for the CPI. If they are going to have a zombie RPI except for switching out the accounting approach to owner-occupied housing for imputed rents, shouldn’t they have a cauliflower series for the CPI/CPIH?
    The national average weekly wholesale prices of home-grown horticultural produce tell a somewhat different story, with the average price going from 52 pence the week ending 2 August to 163 pence the week ending 23 August back to 51 pence the week ending 11 October, which is about what you paid for your cauliflower. The two series don’t necessarily contradict each other, as they relate to different markets, but there certainly is quite a difference in movement.

    • Hi Andrew and thank you

      You have reminded me to check the UK pork index and in case anyone reading this is wondering if the pork swine fever problems are affecting prices in the UK the answer is no as the RPI pork index has fallen 4.4% in the year to August. Bacon is up 2.8% but even so…

      As to Cauliflowers then the 59 pence was a special offer but another supermarket is doing it now so the tenet of UK Cauliflowers being in short supply has proven false. I did check in another supermarket and they were at what was the usual price of £1. So whatever changes there were at the wholesale level the supermarkets ignored/smoothed it out.

      Very different to the rise in butter prices of a year ot 2 ago and what happened with broccoli a while back as its price has remained high.

      I recall reading about high vegetable prices in Canada. Are they expensive there?

      • Thank you for your reply, Shaun. Fresh vegetable prices have increased a lot recently. The annual rate of increase was 12.4% in September 2019, as compared to a 1.9% CPI inflation rate. Potatoes were up by 17.8% and lettuce by 8.5%. However, from August to September fresh vegetables dropped by 5.3%, and were in fact the fourth most important downward contributor to the monthly inflation rate .I don’t know if fresh vegetables are expensive as compared to in the UK. The average retail price series of Statistics Canada shows onions selling for $2.42 per kg in September (i.e. about 143 pence per kg), which I would think is pricey compared to the UK.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.