MNI: 5 Things To Look For: UK Retail Sales Data

Repeats Story Initially Transmitted at 11:46 GMT Feb 15/06:46 EST Feb 15

--UK January Retail Sales Data Due For Release Friday

By Jamie Satchithanantham

     LONDON (MNI) - The UK January retail sales data print will be released Feb

16. The MNI median expectations, taken from a poll of analysts, look for a 0.5%

m/m rise in total sales volumes and a 2.4% rise on the year. 

                Jan Retail

                     Sales  Jan Retail Sales  Jan Retail Sales  Jan Retail Sales

              Incl. Petrol      Incl. Petrol      Excl. Petrol      Incl. Petrol

                       m/m             % Y/Y             % M/M             % M/M

--------------------------------------------------------------------------------

MNI

Median                +0.5              +2.4              +0.4              +2.3

Prior                 -1.5              +1.4              -1.6              +1.3

     Ahead of the release, we highlight five themes for particular attention.

     - Jan Data Will Help Make Sense of the Festive Period. 

     Typically, the ONS needs a minimum of 5 years' worth of data to carry out

an effective seasonal adjustment and they have struggled to perform this on the

Nov/Dec/Jan retail sales data since promotions like Black Friday (BF) and Cyber

Monday (CM) are i) fairly new in the UK and ii) constantly-changing in terms of

duration and timing, making it harder than usual to interpret the data. What is

evident, however, is a shift in consumer behaviour -- shoppers are more inclined

to bring forward transactions to November from December. This proved true last

year, with a strong November showing (+1.0% m/m) followed by a marked slide in

December (-1.5% m/m). With this added volatility, the overall Nov-Jan period

will provide a better gauge of consumers' spending appetite. 

     -Sales Values Holding Up. 

     Since the rapid ascent in prices in response to the slide in sterling, the

associated erosion of consumers' real incomes has seen sales volumes take a

clear hit. Encouragingly, nominal sales values, however, have held up slightly

better, suggesting households are not tightening their belts too much in

response to elevated prices, higher interest rates and Brexit uncertainty. A

positive spread between retail sales volumes and values generally exists when

CPI is low (below 2%), with this spread inverting when CPI trends upwards. With

CPI widely expected to return to around 2% by the late 2018/early 2019, one

would expect, on the back of this past performance, the current dispersion

between values and volumes to close.   

     - Analysts Struggle to Call January m/m Sales Growth. 

     Though it shouldn't come as any major surprise, analysts have had a tough

time correctly predicting the headline m/m total sales growth number. Over the

past two years they have had a slight tendency to underestimate the figure, with

an average +0.32pp surprise recorded over this period. January figures, in

particular, have proved difficult to estimate, with an absolute surprise in

excess of 1.0pp registered in five of the January numbers since 2011 (2017:

-1.3pp. 2016: +1.55pp, 2013: -1.10pp, 2012: +1.20pp and 2011: +1.45pp). If this

trend continues we could be set for another big surprise in January.     

     - New Year, Same Consumer. 

     Visa, the consumer finance provider, data on household spending started the

year as it ended, sitting in the red for the eighth time in the last nine

months. The data is based on card spending and the number of cards in

circulation (though not Visa's own performance) and shows spending on year-ago

levels negative every month since April last year, whilst trending down from as

far back as late 2014. The series has tracked the official data quite closely.

January's data highlighted a fall in car sales, offset by increased sales at

restaurants, hotels and hair salons. 

     - January Sentiment Pick Up. 

     The GfK Consumer Sentiment Index put in one of its best showings in a while

in January, rising four points to -9. While it is too early to say whether this

marks the start of an uptick to consumer confidence and buying appetites, it

arrived alongside a welcomed rise in non-food sales. With inflation eating away

at consumers' disposable income, spending on discretionary/luxury items has been

sacrificed, with households choosing to maintain their spending on the more

essential items - food, fuel, etc. This is part explains why sales volumes have

dropped but values have held up slightly better (see point 2). As real wages

recover we may start to see appetites for these non-essential items pick up too.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com