MNI 5 THINGS: UK Sep Retail Sales Could See Pre-Discount Lull

By Jai Lakhani and Jamie Satchi

     LONDON (MNI) - UK retail sales fell in September, outpacing analyst

expectations, down 0.8% m/m. However, conflicting survey data means ambiguity

surrounds the October data, with no clear view as whether the release will bring

further disappointment or not. 

Analysts foresee the latter, with the median estimate, taken from MNI's poll of

forecasters, pointing to a 0.2% m/m rise in both total and ex-fuel sales. 

Below are five points we feel warrant attention. 

          September Retail  September Retail  September Retail  September Retail

                     Sales             Sales             Sales             Sales

                Incl. Fuel        Incl. Fuel        Excl. Fuel        Excl. Fuel

                     % m/m             % y/y             % m/m             % y/y

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

Prior                 -0.8               3.0              -0.8               3.2

MNI

Median                 0.2               3.0               0.2               3.3

Upside Surprises Support Rebound: Since 2010, there have been four upside

surprises in October (actual>market consensus), with three of these coming in

the last four years. The solitary correct call by analysts in October 2013

leaves three downside surprises. Thus, the data suggests the 0.2% m/m forecast

could be an underestimate with an average up-side surprise of 0.075pp possible.

BRC Survey Data Only Slightly Positive: The BRC provided some supporting

evidence for a bounce-back in retail sales, growing by 1.3% y/y in October 0.6pp

higher than the 0.7% rate registered in September. However, this was still below

the 12-month average and commentary around the October survey was one of

cautious spending, with consumers potentially holding off on discretionary

purchases in anticipation of Black Friday and Cyber Monday promotions in the

coming weeks. 

Clothing and Footwear Sales (y/y) Supported by Base Effect: In October last

year, clothing and footwear sales volumes declined by 1.4% m/m -- a then

eleven-month low. Consequently, volumes, on a year-on-year basis, could still

rise so long as sales fell by less than 1.8% between this September and October

(assuming no other revisions). Survey data have signalled conflicting views.

Visa spending data (NSA) from its October survey had clothing and footwear sales

down 3.2% y/y while clothing was the 5th best performer in the month's BRC

survey, up from 11th place a month earlier.

Visa Data Points to Moderation. Visa's seasonally adjusted consumer spending

series tracks the official measure fairly well (see chart 1 below), and data

from October's survey was suggestive of a slowdown in activity at the start of

the fourth quarter. The Visa data paints a fairly sombre picture, with household

expenditure only up four times so far this year. The survey, like its BRC

counterpart, purported that consumers may be reigning in consumption in

anticipation of future discounting. Look at the survey's NSA breakdown (chart

2), spending on health and education rose by a more pronounced amount relative

to last October, with students returning to University, and weaker spending on

clothing relative to the past two months.

Second-Hand Goods Drove Last Year's Rise: Of the originally-reported 0.3% m/m

rise in retail sales volumes last October, non-food stores accounted for 0.4pp

of this change. Within this, second-hand goods (charity shops, auctions, etc.)

accounted for roughly half of this (0.19pp), closely followed by computers and

telecommunications equipment (0.16pp). These categories may be worth monitoring

in Thursday's release but subsequent revisions (Oct 17 m/m retail sales was

later revised up to 0.8%) means the influence of second-hand goods may have been

either stronger or weaker than initially reported.  

--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

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