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Economy in Brief

UK Retail Sales Fall But Trend Holds Up
by Robert Brusca March 26, 2009

If there is an enigmatic economy right now it is the UK’s. The central bank is very worried about deflation and economic weakness. Yet the last retail prices report showed inflation up sharply and the core rate stubborn. While surveys of consumer activity and measures of confidence are weak, Yr/Yr real retail sales excluding autos are up a very solid and strong 5.6% and two months into the quarter they are up at a 5.9% pace.

Still, in February, retail sales fell by 1% in nominal terms and 1.9% in real terms (ex autos).

Retail sales have fallen in seven of the last 12 months. They are down in four of the last six months and have risen in only one of the last six months- hardly a picture of strength. The 1.5% rise in nominal sales in January is an important factor keeping the current growth rates firm. Just to complicated things, ex auto real retail sales are up in Three of the past six months as well as in three of the past four months.

This strength in ex-auto sales is surprising. The UK economy is suffering though severe financial problems as is the US. Sentiment is down strongly. But the inflation figures do not want to settle down and consumer spending simply finds ways to stay alive despite some sputtering. It is hard to get a grip on the UK economy because of these divergences. The inability of the government to sell as many bonds as it tried to auction yesterday is another sign of unmoored expectations. Inventors are having a hard time getting a grip on the economy and that makes it hard for them to make investment decisions. I still think weakness will enfold this economy and that the moves to stimulate are the right ones, but for the moment, some unexpected readings of strength are helping to support UK growth and to confuse investors.

UK Real and Nominal Retail Sales Quarter
Nominal Feb-09 Jan-09 Dec-08 3-MO 6-MO 12-MO Yr Ago 2-date
  Retail Total -1.0% 1.5% 0.0% 2.1% -0.7% 0.5% 4.8% 4.7%
  Food Bev & Tobacco 0.7% 0.6% -0.7% 2.2% 5.3% 5.1% 5.7% 2.9%
  Clothing footwear -3.0% 5.0% 1.0% 11.8% -4.8% -1.1% 3.1% 19.7%
  Retail Ex auto -1.9% 0.8% 1.9% 3.2% 0.9% 0.5% 5.6% 5.9%
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