UK Retail Sales look to be still struggling with seasonal adjustments

We can continue our pre-election journey through the UK economy as this morning we received the Retail Sales numbers. As we were getting used to better news the contrary nature of this series produced this.

Retail sales volumes (quantity bought) fell by 2.3% in April 2024, following a fall of 0.2% in March 2024 (revised from 0.0%).

So not only was April very weak but March was revised slightly lower too so it was from a worse start. But let me give you my first perspective which is that I am already wondering if the timing of Easter ( the April numbers start on Easter Sunday) created another seasonal adjustment problem? This is highlighted if we look further back.

More broadly, sales volumes rose by 0.7% in the three months to April 2024 when compared with the previous three months, following a poor December 2023.

The poor December where the index fell from 97.7 to 94 and the subsequent surge in January to 97.6 made me think it was more likely that the seasonal adjustment was a mess than we behaved like in a pantomime with boos and then cheers for the numbers. The real world was very unlikely to have behaved like this. So with the obvious Easter distortions my first thought is to wonder here we go again?

The Breakdown

The falls seen were pretty broad in category and widespread.

Non-food stores sales volumes (the total of department, clothing, household and other non-food stores) fell by 4.1% in April 2024. This was the joint largest fall (shared with December 2023) since January 2021. Within non-food, falls were strongest within clothing retailers, sports equipment, games and toys stores, and furniture stores, with retailers reporting poor weather and low footfall as the main reasons.

The heaviest fallers were household goods (5.4%), and the clothing and other category both of which fell by 5.1%.So it was another kick in the teeth for the high street although it does provide some backing for the official excuse.

This is consistent with national retail footfall data from our Economic activity and social change in the UK, real-time indicators bulletin, which reported footfall falling on the year. The Met Office climate summaries reported April 2024 as being a dull and wet month, receiving 155% of average rainfall and just 79% of average sunshine hours.

So singing along with Bob Dylan.

And it’s a hard, and it’s a hard, it’s a hard, and it’s a hard
And it’s a hard rain’s a-gonna fall

Also I note that the official release mentions my theme of higher prices affecting Retail Sales.

Retailers reported cost of living and the impact of rising fuel prices as factors;

The one area which improved was rather curiously department stores but this was by a mere 0.4%. Maybe shoppers used them to shelter from the rain.

Even online sales fell which of course is rather hard to blame on the rain!.

The amount spent online, known as online spending values, fell by 1.2% during April 2024, and by 1.5% over the year.

As total spend showed a greater fall during the month (2.6%), the proportion of sales made online increased from 26.2% in March 2024 (revised from 25.9%) to 26.5% in April 2024.

Looking further back we see that the comparisons are poor.

Over the year to April 2024, volumes fell by 2.7%, and were 3.8% below their pre-coronavirus (COVID-19) pandemic level in February 2020…….and fell by 0.8% when compared with the three months to April 2023.

Consumer Confidence

There was a new release on this subject which poses another question for the Retail Sales release.

Joe Staton, Client Strategy Director GfK, says: “There was another strong showing for the UK Consumer Confidence Index this month, driven by a jump in the outlook for our personal finances (up five) and a boost for our view on the wider economy in the coming year (up four). “

May is after the release but the Gfk consumer confidence series improved by 2 points in April and has in general been rising since the recent nadir of October last year.

Energy Bills 

The change in July is very welcome overall.

From 1 July to 30 September the price for energy a typical household who use electricity and gas and pay by Direct Debit will go down to £1568 per year. This is £122 per year lower than the price cap set from 1 April to 30 June 2024 (£1690).

However there is something very disappointing in the detail as Pail Lewis of BBC Radio 4’s Moneybox points out.

Electricity and gas unit prices, high during the winter cold weather, will fall in July by 9%ish in time for when we use less in the summer. Standing charges £334 a year stay the same so overall bills will fall 7.2%.

So the poor will benefit much less as for them standing charges are a much bigger deal. What an awful organisation Ofgem is and if I came to power I would close it tomorrow as it represents the suppliers rather than the consumers showing yet another example of regulatory capture.

National Grid

Earlier this week we looked at its need for around £60 billion for the energy transition and the way it will raise future energy bills. Well here is a warning from the United States about a National Grid project over there.

The utility National Grid wants to expand its efforts to heat its customers’ homes and businesses with gas generated from the digestion of human and food waste — and wants you to pay for it as part of a proposed rate hike. ( Naked Capitalism)

This rather ignores the fact that it works intermittently.

For the yearlong period between April 2023 and March 2024, National Grid’s system to feed gas produced at the wastewater treatment plant to customers was down for 4,065 hours (or about 169 days) and working for 4,719 hours (or about 197 days). ( Naked Capitalism)

Of course there is a price to pay.

If greenlit by regulators, National Grid could charge its customers in New York City about $13.2 million to subsidize capital costs (Long Island customers would be on the hook for about $9.9 million). The company expects the four systems could be in service by mid-2027.

Bank of England

The election announcement has rather taken away the chance of an interest-rate cut on June 20th which would be at the height of the general election campaign.

Comment

It looks to me as if the Retail Sales numbers have a real problem with seasonal adjustment. I have to confess that this adds to my discomfort at the behaviour of the Chief Economist of the Office for National Statistics Grant Fitzner at yesterday’s Better Statistics seminar. Whilst it is a success for Better Statistics to get him and the head of the Office for Statistics Responsibility Ed Humpherson to attend the problem is what they then say. The OSR loudly proclaims its independence hoping no-one will spot how it seems to operate hand in glove with the ONS.

Next up in response to my question as to why the new HCI inflation measures are regarded as not “established” after at least 5/6 years when we are supposed to accept the new rental series immediately? Especially as the previous rental series had been admitted to be plainly wrong. The response was to talk and talk and then declare the question over.

So I think we will have to wait until the next Retail Sales numbers to hopefully have a bit more idea of what is really happening.