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Economy in Brief

U.K. Distributive Trades Show Recovery and Strength
by Robert Brusca  August 24, 2021

U.K. distributive trades show recovery in August and post solid-to-strong responses for the month ahead in September as well. The U.K. economy looks very solid through the lens of this report.

On data ranked against all observations since January 1998, the U.K. Retailing and Wholesaling distributive trades rankings for August show survey responses that are extremely high. The reported response ranks for current activity are high and the response ranks for expected activity are high. There are differences in momentum, but the sense of strength from these rankings is unmistakably encouraging and upbeat.

Table 1

Table 2 culls the ranking data from Table 1 to present side by side comparisons of the ranking data. These are undeniably impressive results. Retail sales from a year ago, retail orders from a year ago, and retail sales for 'this time of year,' a sort of paean to seasonal adjustment, all show strength. All these metrics are in the top five percent of all observations in their respective distributions of responses back to 1998, a period of over 23.5 years. Wholesaling has the same sorts of responses in its surveys but with a much less robust, 68 percentile, standing for sales compared to one year ago.

Expected parameters are nearly as strong with retailing showing rankings in the 90th percentile for sales year-on-year as well as for orders year-on-year, but with sales 'for the time of year' at a more modest 77.5 percentile standing. Expected conditions in wholesaling show sales (year-on-year) at a higher ranking in their 87.7 percentile, stronger than for the current assessment ranking of sales. Orders (yr/ago) and sales for 'the time of year' are both with very strong 90th percentile decile standings.

On balance, we see very positive assessments of both wholesaling and retailing in the current period as well as for the period ahead. Conditions are not just solid; they are exceptionally and uniformly strong. As solid and strong as the current state is, the future is expected in some sense to be just as good. That explains why the stock-sales assessments are so low. Firms are having a hard time keeping their inventories full and are not expecting to be able to restore inventories to normal stocking practices in the period ahead. These weak stock assessments are also indicators of expected sector strength in demand.

Table 2

In terms of momentum, retailing looks stronger than wholesaling. While there is no denying the strength in the queue standings, retailing is showing, in addition to that, a surge in August in sales, orders and 'time of year sales' compared to July. Stock assessments get even weaker in August. For wholesaling, August brings a pullback for sales and orders while 'time of year' sales are unchanged from their July levels.

Expectations mirror these developments in momentum as expected retail sales and orders moved sharply above the readings on expectations for August and sales 'for time of year' advance as well. In the wholesaling, there is a cooling in expectations for September compared to August for sales and orders, but expected 'sales for time of year' advance briskly.

The column representing 'percentile standing' labeled (Percentile) in Table 1 ranks the responses differently, assessing them by positioning the current reading between the series' historic highest and lowest observations since January 1998-a very different concept of ranking than the queue standing metrics that position an observation in an ordered queue of data on that same timeline. What these rankings show is that retail sales and orders are not just high in their queues of observations, but they are the strongest observations seen on this timeline for sales and orders and for expected orders. It is impressive to have three 'global maximum' results on nearly 24 years of data occurring in one month.

By comparison, wholesaling queue standings are equally as impressively high, but they do not produce readings that are at historic peaks. Wholesale sales rank at the 74th percentile of its high-low range; orders stand at their 89th percentile; sales for 'time of year' are at their 87th percentile (that one is similar to the percentile standing for retailing sales). Expectations for wholesaling have 80th and 90th percentile standings in their high-low range. Here, wholesaling 'sales for time of year' have a stronger percentile standing than in retail sales.

The cutting-edge strength seems to be in retailing, but that is being passed along in good measure to wholesaling. The two sectors are both showing impressive responses no matter how they are viewed- but some angles of observation are more impressive than others.

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