The Covid-19 pandemic has brought about all sorts of economic events. Yesterday evening I went for a stroll in Battersea Park and it was quite noticeable how the number of people going for a picnic there has increased. We do not know how permanent that will be but I suspect at least some of it will be as people discover that the same bottle of wine is so much cheaper than at a wine bar or pub. Oh yes and some seem to forget the food part of the picnic! I can see that BBC Breakfast have put their own spin on it.
9-year-old Sky had this message on #BBCBreakfast for people dropping litter in parks and open spaces
Yes more people have created more litter. Kudos to @PolemicPaine who pointed out ahead of a flurry of such media reports that it would happen. Some people’s behaviour is bad but in recent years the cleanliness of Battersea Park has improved a lot and thank you to the workers there.
These are the numbers which were likely to be harbingers of change in the trajectory of the UK economy. So this morning’s news was rather welcome.
In June 2020, the volume of retail sales increased by 13.9% when compared with May 2020 as non-food and fuel stores continue their recovery from the sharp falls experienced since the start of the coronavirus (COVID-19) pandemic.
That was quite a surge and means this.
The two monthly increases in the volume of retail sales in May and June 2020 have brought total sales to a similar level as before the coronavirus pandemic; however, there is a mixed picture in different store types.
There is another way of looking at this.
In June, total retail sales continued to increase to reach similar levels as before the pandemic, with a fall of just 0.6% when compared with February.
So is it in modern language, like well over? Not quite as the text is a little reticent in pointing this out but volumes were some 1.6% lower than last June. Whilst growth had been slowing we usually have some so perhaps 3% lower than we might usually expect. However these are strong numbers in the circumstances and will have come as an especial shock to readers of the Financial Times with the economics editor reporting this. I have highlighted the bit which applies to June.
The latest numbers on card payments and bank account transactions from Fable Data show that in the week to July 19, total spending in the UK was 25 per cent down on the same week in 2019, a deterioration from a 13 per cent decline four weeks earlier.
As you can see whilst consumption is a larger category than Retail Sales there is quite a difference in the numbers here. According to the report by the economics editor of the FT a bad June was followed by a woeful July.
The latest indications from unofficial data on spending patterns in the UK suggests the economic recovery that began in late April has stalled — and possibly even moved backwards in July. Separate figures from the Bank of England’s payment system and from card payments collected by Fable Data show a worse picture for spending in mid-July than at the start of the month.
Whilst the overall picture is pretty much back to February there have been some ch-ch-changes in the pattern.
In June, while non-food stores and fuel sales show strong monthly growths in the volume of sales at 45.5% and 21.5% respectively, levels have still not recovered from the sharp falls experienced in March and April.
My personal fuel sales shot up as I bought some diesel and went to visit an aunt and my mother;s house at the end of June but on a more serious level traffic in Battersea picked up noticeably. This is in spite of the official effort to discourage driving just after telling people to drive! Anyway switching sectors this is interesting.
Following this peak, sales returned to a level higher than before the pandemic. In June 2020, despite a small monthly decline of 0.1% in volume sales, food stores remained 5.3% higher than in February 2020.
I say that because of this.
Feedback from food retailers had suggested that consumers were panic buying in preparation for the impending lockdown.
If they were we would expect a dip going ahead. On a personal level I did put some extra stuff in my freezer in case I had to quarantine ( it was 7 days then) and bought some more tinned food. But collectively the other side of that has not been seen so far. Maybe it is because the June numbers do not see the opening of restaurants and the like which began on July 4th.
I doubt anyone is going to be surprised by this.
Non-store retailing has reached a new high level in June 2020, with continued growth during the pandemic and a 53.6% increase in volume sales when compared with February 2020.
Let me now give you the two polar opposites starting with the bad.
Textile, clothing and footwear stores show the sharpest decline in total sales at negative 34.9%. This was because of a combination of a large fall within stores at negative 50.8% along with a slower uptake in online sales, with a 26.8% increase from February.
Now the up,up and away.
Household goods stores, as the only store type to show an increase since the start of the pandemic, has a large uptake in online sales, increasing by 103.2%. In addition, household goods stores saw the smallest decline in store sales when compared with other non-food stores, at negative 15.2%.
I am glad to see my friend who has been painting his garage door and some windows pop up in the figures.
In June, electrical household appliances, hardware, paints and glass, and furniture stores all returned to similar levels as before the pandemic.
This is welcome news for the UK economy and it provides another piece of evidence for one of my themes. For newer readers I argued back in January 2015 that lower prices boost the economy ( the opposite of the Bank of England view) and we see that lower prices in retail have led us to getting right back to where we started from. I am sure that some PhD’s at the Bank of England are being instructed to sufficiently torture the numbers to disprove this already.
Actually the Bank of England is in disarray as in response to the FT data above one of its members seems to have switched to analysing health.
Jonathan Haskel, an external member of the BoE’s Monetary Policy Committee, said the evidence was beginning to show that household concerns about health were more likely to drive spending than government lockdown rules.
Oh well. Also this made me laugh, after all who provided all the liquidity?
“The need for more equity finance creates a case for authorities to be ambitious in reforming the financial system to remove any biases against the patience that’s needed for many equity investments,” he said.
“Even investors who should have the longest horizons seem to have a fetish for liquidity and an aversion to really illiquid growth capital assets.” he said. ( Reuters)
I do hope somebody pointed out to Alex Brazier, the BoE’s Executive Director for Financial Stability Strategy and Risk that the speech should be given to his own colleagues who have been singing along to Elvis Costello.
Pump it up, until you can feel it
Pump it up, when you don’t really need it
Let me finish by pointing out that these retail numbers are imprecise in normal times and will be worse now. So we have seen quite an upwards shift of say around 10%. Moving onto numbers which are even more unreliable there was more good news but regular readers will know to splash some salt around these.
At 57.1 in July, up from 47.7 in June, the headline seasonally
adjusted IHS Markit / CIPS Flash UK Composite Output Index – which is based on approximately 85% of usual monthly replies – registered above the 50.0 no-change value for the first time since February.