U.K. Retail Sales Perk Up

The CBI survey of UK retail sales advanced in August even though sales had been expected to weaken. And sales expected for the month ahead, September, have surged and stand above their 12-month average.

U.K. sales in August posted a 24 diffusion reading, up from 21 in July. The monthly gain was still below the 12-month average of 29.

Orders slipped to 2 in August from 18 in July and, at that, orders are below their 12-month average of 10.

While orders may have underperformed, sales for the `time of year' was up to 17 in August from -1 and well above the 12-month average score of 6. And stocks were up a tick on the month but well below the average posted over the previous 12 months.

On balance, these are good results for U.K. retail sales. The under-performance of orders is a concern except that expected sales for next month are still upbeat even though orders expectations are continuing to lag. Expected sales for September are at 35, well up from 13 for August and ahead of the 12-month average of 33.

Expected orders are up to 5 in September from -10 in August but still well below the 12-month average score of 15.

Expected sales for the `time of year' in September are the real bright spot. They are up to 21 from -1 in August and well above their 12-month average of 11. Meanwhile, stocks continue to get moderate ratings. They are not being overbuilt.

U.K. sales are doing well and generally are outperforming expectations. But how long can this go on? Sales stand in the 68th percentile of their historic queue. Meanwhile, current orders are only at their 55th percentile. Sales have been running ahead of orders and that continues when we look at expected sales vs. expected orders.

While the U.K. sales data have been upbeat, orders have been lagging. The lag in orders has to be taken as a sign that sales are living on borrowed time. Either that or merchandisers are not confident enough in ordering to keep orders in step with sales and that would not be a good development either. For these reasons, we look somewhat skeptically at U.K. retail sales trends. The chart shows that the recent under-performance of orders relative to sales has gotten worse.