Even the UK consumer can not always spend “more more more”

The issue of retail sales is one that has become a signal of our times in various ways. It has long been considered a support for economic growth especially in my home country the UK. However there are places where economics would like more of it such as in the surplus countries Germany and Japan which would then help with rebalancing world trade via higher imports. In more recent times the green agenda clearly implies lower retail sales although something which is likely to be as unpopular is that tends not to get much publicity. Finally there is the issue of the decline of the high street and the rise of online shopping. It is hard for shops to compete with companies willing to deliver even at 9 o’clock on a Sunday evening as I have observed recently.

Measuring such things is complex and let me illustrate with a story which starts well. From the US Census Bureau.

Advance estimates of U.S. retail and food services sales for December 2019, adjusted for seasonal
variation and holiday and trading-day differences, but not for price changes, were $529.6 billion, an
increase of 0.3 percent (±0.4 percent)* from the previous month, and 5.8 percent (±0.7 percent) above
December 2018

I have highlighted the bit which shows that these are turnover or nominal rather than real figures. But there is more to it than meets the eye as whilst these look good there were downwards revisions I gather which mean that the Atlanta Fed GDP Nowcast thinks this.

 After this morning’s retail sales release from the U.S. Census Bureau, the nowcast of fourth-quarter real personal consumption expenditures growth declined from 2.3 percent to 1.6 percent.

As Avril Lavigne pointed out.

Why’d you have to go and make things so complicated?

The UK

The background has been provided by the British Retail Consortium.

Total sales for 2019 decreased by 0.1%, compared with 1.2% growth in 2018. This is the worst year on record…………Taking November and December together to iron out the Black Friday distortions, Total sales declined 0.9% compared with the same period in 2018…….Taking November and December together to iron out the Black Friday distortions, Like-for-Like sales declined 1.2% compared with the same period in 2018.

This is what produced the headlines which were copied across social media that this had been the worst year for UK retail since 1995. This was not the media’s finest hour as this was plainly rubbish to anyone who has any knowledge of the official data. Let us be generous and say that such a view is true for some of the department stores and so on struggling to compete with the virtual world.

Today’s data

We have been observing a slowing of the rate of growth as 2019 had developed and this continued in December.

Comparing the three months to December 2019 against the same three months a year ago, growth in the quantity bought increased by 1.6% in December 2019, despite a strong decline of 2.2% for department stores.

Along the way we get a reminder that department stores are essentially in a depression, which is backed up by this next bit,

Online sales as a proportion of all retailing was 19.0% in December 2019, compared with the 18.6% reported in November 2019.

Actually whilst we still have annual growth if we look more recently we have moved into a decline.

Looking at the three-month on three-month growth rate, the quantity bought in retail sales has not experienced growth for three consecutive months. The three months to October 2019 remained flat, while the three months to November and December fell by 0.5% and 1.0% respectively.

Indeed and it was a case of and the beat goes on if we look at December itself.

The quantity bought in December 2019 fell by 0.6% when compared with the previous month; the fifth consecutive month of no growth.

I am not quite sure why they say/write “no growth” when there is a perfectly useful word like decline available. Anyway we get very little detail for December but do from the three-monthly detail get more of a grip about what has happened in 2019.

Declines were seen across most sectors except for household goods stores and fuel. The strong decline of 3.2% in non-store retailing was largely because of a fallback from very strong growth in the previous three months for September at 4.0%, this included large monthly growth in July of 7.3%, which was attributed to large promotions in the sector. The quantity of goods bought in non-store retailing increased on the latest month by 1.0%.

This is a sort of a doppelganger of the situation in the US we observed earlier. There we saw December misleading as the trend whereas in the UK it was the surge in July and subsequent associated fall back which has muddied the water.

Also if we widen our perspective from pure economics perhaps the pressure on providers and sellers of cheap fashion clothing is having an impact.

Clothing experienced strong declines both on the month at negative 2.0% and in the three months to December at negative 2.3%. This is the sixth consecutive month of no growth for clothing stores for the three-month on three-month movement.

Comment

The situation regarding UK Retail Sales has been “slip-sliding away” as Paul Simon put it in the latter part of 2019. Care is needed as it had previously been very strong and it cannot keep surging. Even the UK consumer must tire eventually. But there are consequences from the apparent shift and clear food for thought is provided by the fact that an already weak last quarter of 2019 will have a downwards pull on its GDP of the order of 0.05%.

That then turns eyes to Threadneeedle Street and the Bank of England which told us this earlier this week. From Monday.

Gertjan Vlieghe, an external MPC member, said his view on whether to keep waiting for an economic revival or vote to lower rates from 0.75 per cent to 0.5 per cent would depend on survey data released towards the end of January.

The Retail Sales release is likely to have him at least singing along with Prince.

She’s never satisfied (She’s never satisfied)
Why do we scream at each other
This is what it sounds like
When doves cry

In a more sophisticated world where they are supposed to look forwards they should be noting that the sentiment reports have shown a post election rally. But back in the real world they have an itchy-finger for interest-rate cuts if the summer of 2016 is any guide. Although the Governor’s focus has changed.

Mark Carney said: “It’s an honour to be supporting the Prime Minister as the UK invites almost 200 countries to Glasgow in November to address the climate threat. This COP 26 Summit will be a critical moment for climate action.”

Will they fly in so that they can tell the rest of us not to fly?

If we return to the “worst year since 1995” release then even today’s weak numbers have scotched that. The lust for clickbait so often trumps reasoning and thought.

 

 

 

 

10 thoughts on “Even the UK consumer can not always spend “more more more”

  1. Bleak news for High Street says City AM

    https://www.cityam.com/uk-retail-sales-fall-in-golden-quarter/

    However John Lewis sales still down in January which conflicts with analysts view of a pick up in January.

    Moat severe decline in 9 years says FT

    https://www.ft.com/content/5ffbcf7e-390e-11ea-a6d3-9a26f8c3cba4

    BBC business

    https://www.bbc.co.uk/news/business-51147634

    The data so far this month does not paint a pretty picture its been a lacklustre Christmas and it I expected poor figures after the retailers sales figures. Even food sales lacked an appetite from the consumer public.

    The had news is partly good news as the greenies will be delighted at the consumers thinking twice what they buy and waste less and concentrate on sustainability.

    The BOE wont like the figures however and there is now a 75% chance of a rate cut the end of the month..

    With it being a mild winter it will be good for UK growers there will be good stock of vegetables so the prices should fall meaning less inflation, even more reason for a cut in intertest rates imo.

    There will also be downward pressure on utilities its very mild today almost Spring like weather in the North West though a few cold days expected over the weekend but not to last.

    • Hi Peter

      It has been mild down here too although I believe we are in for a colder few days. As to vegetables aren’t some such as Brussel Sprouts supposed to need a frost?

      Moving onto the Bank of England I have been expecting them to cut for a while now as you know.We should have traded that percentages market you quote as we were well ahead of the game.

  2. Hi Shaun, OT I know, but my union rep is saying they are predicting RPI for February(the agreed inflation figure for this years negotiations to be based around) of 3.1%. From previous experience I have warned him that figure always seems to magically drop for some reason by the time February arrives[a lot of large employers use it:)))]), so do you know if it is likely or not to be met?

  3. Mark Carney is such a liar. He prances about pretending to be worried about climate change while he and his whole class of CBs is lowering interest rates *specifically* in order to boost consumption.

    If financial reporting wasn’t so utterly worthless Carney would be crucified every time he gave a press conference.

    • TW,

      Well some would say even if the BOE does reducer interest rates it will make little difference!

      But on the green energy economy front its actually shrunk since 2014 due to less subsidies strangely enough:

      https://www.theguardian.com/environment/2020/jan/16/uk-green-economy-has-shrunk-since-2014

      Joe Public is indebted up their armpits and at some stage they would reign in their spending which the retail figures today indicated.

      As for wage rises well I think they have peaked, albeit the minimum wage is to go up in April, but lets face it many low wage rises are in retail and there will be loss of jobs in the sector !

      The Borris bounce may have improved the housing marker but according to retail talk they aren’t looking for retail spend to increase this year.

      Rents are still going up and housing costs a burden, most people on fixed rates in any event.

      A cut may in fact make a small difference to consumption that is why the BOE will probably seriously consider a 0.25% cut end of month and I think they will.

    • “He prances about pretending to be worried about climate change while he and his whole class of CBs is lowering interest rates *specifically* in order to boost consumption.”
      _______________________
      Why be corrupt in one pseudo-science when you can be corrupt in two?

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