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Economy in Brief

U.K. Real Retail Sales Bounce Back and Look-Ahead on Orders Is Positive
by Robert Brusca  February 18, 2022

U.K. retail sales rose 2% in January after falling by 3.4% in December. Still, sequential growth rates for nominal sales decelerated from a 16.5% pace over 12 months to a 4.4% pace over six months to 2.2% over three months. Spending on beverages & tobacco as well as on clothing & footwear shows decelerating growth rates.

Retail volumes also show sequential deceleration. Volume sales rise 1.9% in January after falling by 3.9% in December. The sequential pace of sales falls from a strong 9.1% annual rate over 12 months to -2.7% over six months and to -5.3% over three months.

In the quarter-to-date, nominal sales rise by 2%, but sales volumes are falling at a 3.2% annual rate.

We can also rank the year-on-year growth rates for sales; the rate ranks at a very high 98.8 percentile. For sales volumes, it ranks at the same high 98.8 percentile. That is good news, but it is undermined by the trends.

The progression for sales shows a slowdown except for registrations for passenger cars. Car purchases have surged at a 48% rate over three months. Passenger car sales are strong in the quarter and rank high in terms of their year-to-date rate of growth. But it is only a partial offset to slowing retail sales overall.

Surveys for retail sales are slightly less robust in terms of their long-term percentile standing. The CBI survey for retail sales for this time of year (a sort of seasonally adjusted view) has only a 19-percentile standing, in the lower one-fifth of its historic queue of data. Consumer confidence has a 26-percentile standing, at the border of the lower quarter of its historic queue of data. The volume of orders year-on-year does better with a queue standing at an 80.6 percentile.

The surveys show quarter-to-date declines in all the survey metrics in the table including consumer confidence. The data on sequential changes are not getting worse at a progressively worsening pace, but the changes in the survey metrics do erode over six months as well as over three months- just not faster. The six-month erosion is a reversal of gains made over 12 months and over three months. That erosion continues at nearly the same pace. Only for consumer confidence is the pace of erosion lessened over three months.

In January and December, however, there is ongoing erosion for the retail surveys and for consumer confidence.

Summing up
The scope of U.K. retail sales shows still strong year-on-year growth. But that may be a bit of an illusion. The trends show unambiguous evidence of decay in that trend. Sales, nominal sales, sales volume, and surveys as well as consumer confidence all show a declining trend. The only observation bucking this trend is the strong three-month recovery of passenger car registrations.

The U.K. has been battered by its transition to Brexit and several episodes of Covid that have interrupted or simply changed economic activity. The U.K. infection rate currently is still running down after an enormous spike that peaked in January. As has been the case globally, U.K. death rates picked up but are running off. Despite the enormous increasing infections, the death count was only a fraction of its past peaks. Looking ahead, there is a question of how people will react in this unfamiliar environment in which there has been more infection but less death. No one knows the future. But the trends, the groundwork, and oncoming transition to warmer weather should combine to allow the economy to get on a firmer path. For now, we cannot tell how much the Covid issues are responsible for the withering economic trends in sales and in sales-surveys and in confidence. There are a lot of risks in flux as inflation has risen and geopolitical concerns stalk Europe. But that should become clearer in coming months.

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