Economy in Brief

The U.K. distributive trades survey provides sector surveys for retailing and wholesaling in the United Kingdom in April as well as look-ahead observations or expectations for May.

Retail sales and orders currently: In April, retail sales, compared to a year ago, picked up to +5 compared to + 1 in March and +2 in February. Orders compared to a year ago were also stronger at a reading of +1 compared to -2 in March and a much weaker -25 in February. Sales for the time of year are quite upbeat with the survey value of 21 compared to 12 in March and 6 in February. The stock-to-sales ratio fell in April compared to March.

Wholesale sales and orders currently: For wholesaling, sales compared to a year ago were slightly weaker, falling back to a +13 reading from +18 in March, but still are much better than the -28 logged in February. Orders compared to a year ago were slightly improved month-to-month at -2 compared to -3 in March, and much better than the -23 logged in February. Sales for the time of year were down sharply at +15 but from an extremely elevated +35 in March; moreover, they compare favorably to zero in February and rank solidly in April. The stock-to-sales ratio has risen steadily from February to March to April.

Current sales and orders queue rankings: The queue ranking data reported sales in retailing and distributive trades show sales for the time of year extremely strong at a 93-percentile standing for retailing and at a firm 52-percentile standing for wholesaling. In retailing sales compared to a year ago have a 40-percentile standing and orders compared to a year ago have a 46.5 percentile standing; each of those metrics is below its respective historic median- on percentile ranked data the median lives at the 50-percentile ranking. The stock-to-sales rank in retailing is low at a 3.5 percentile standing. For distributive trades sales compared to a year ago, sales log a 46-percentile standing and orders compared to a year ago have a roughly 40-percentile standing; these are not too different from the standings for retail sales. The big difference is in the stock-to-sales ratio which is above its historic median for wholesaling at a 64-percentile standing compared to a very weak standing in retailing.

Expectations Expected retail sales and orders: Expected retail sales for the month ahead project a decline in sales compared to a year ago on a -7 reading in May compared to +9 in April. Orders compared to a year ago are also expected to weaken to a -8 reading compared to zero for orders relative to a year ago as assessed last month. However, both these metrics are stronger in May than their March and February values. Moreover, sales, adjusted for the time of year, are expected to rise to +16 in May from +13 in April. This also compared to +11 in March and -2 in February. Expected retail sales for the time of year are strong. The stock-to-sales ratio is expected to be slightly lower.

Expected wholesale sales and orders: Expected wholesale sales year-over-year are stronger at +9 in May compared to +2 in April and compared to values of -22 in March and February. Wholesale orders expected compared to a year ago are improved to -1 compared to -13 in April and compared to much weaker values in March in February. Expected wholesale sales for the time of year are expected to step back to a +14 reading from +17 in April, leaving them even with March’s +14 but stronger than a -8 reading in February. The stock-to-sales ratio is expected to step up in March and to continue with a step-up trend.

Expected retail and wholesale sales and orders queue rankings: The rank standings for expectations are somewhat similar as retailing has an 89-percentile standing for sales for the time of year while wholesaling logs an above median 60th percentile standing- not as strong- but a reading also well above its median. Retailing expectations for sales and orders compared to a year ago are weaker than in wholesaling; the retailing rank for sales compared to a year ago has a 17.5 percentile standing and expected orders compared to a year ago have a 28th percentile standing. For wholesaling expectations, the rankings are 43.2% for sales and 40.7% for orders. Retailing also has a low ranking for the stock-to-sales ratio on expected data while wholesaling has a 75.4 percentile standing; that is firm.

The Germany’s IFO index moved higher in April to a reading of +0.3 from a reading of -0.8 in March. Two of the five components among the sectors log positive values in April; those are manufacturing and services; manufacturing showed a small improvement as services, while staying positive, backtracked from its reading in March. Retailing had a stronger value at -11.3 in April compared to -13.5 in March. Construction also improved to -16.7 from -17.5 in March. The wholesaling sector, however, deteriorated to -10.3, down from -7.5 in March. On balance, the climate readings in April were mixed in terms of their month-to-month changes but remained weak in terms of their standings. Only two sectors show standings above their historic medians on data back to 1991: those are construction and retailing with construction at a standing at 52.2% and retailing at a standing of 53.9%. Manufacturing has a standing of 45.5%, wholesaling is at 38.3% and services at 21.6%. However, based on the weighting scheme, the all-sector index surpasses 50% with a reading of 50.3%, bringing climate overall to an above-median reading by a small margin.

Current conditions in April slipped with the all-sector index falling back to 16.4 from 17.5 in March. April saw slippage in each of the five sectors. Each sector logged a positive reading in April but in each case, it was lower than the positive reading in March. Current conditions showed most sectors- 4 out of five of them; in fact, with readings above their historic medians. Manufacturing, construction wholesaling and retailing all were at percentile standings above 50%. However, the services sector standing at 26.0% is weak enough and the sector is important enough to hold the overall all-sector current conditions ranking at a 28.2 percentile standing.

The month in perspective What improved in the month were expectations. The all-sector expectations reading rose to -6.7 in April from -9.3 in March. There were improvements in three out of five of the sectors. Manufacturing improved, construction improved and retailing approved. Backtracking on the month were wholesaling that barely tipped lower to -26.3 from -26.2 and services that fell back to a 7.2 reading from a -4.0 reading in March.

The percentile standings for expectations are uniformly weak with only one reading among the five sectors is above its 20th percentile: in manufacturing with the 36.2 percentile standing. Construction has a 5.1 percentile standing, wholesaling an 8.2 percentile standing, services a 13-percentile standing, and retailing a 15.2 percentile standing.

The bottom line for the IFO is that climate improved marginally on the month as the current conditions index backtracked and its expectations logged a less negative reading. The percentile standings of the current conditions and the expectations components are for the most part still extremely weak. Within current conditions, two sectors have moderately strong readings and two others have moderately firm readings. But within expectations, all the readings are unequivocally and significantly weak. Comparing the readings in April 2023 to the pre-COVID January 2020 readings, we find very mixed results; the all-sector climate reading is better by only 0.9 points, the all-sector current conditions index is stronger by 12.7 points and the all-sector expectations index is stronger by just 1.6 points. Three sectors in expectations are weaker than they were in January 2020 and two are weaker on balance under current conditions. Climate is weaker for three sectors.