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

--UK December Retail Sales Data Due For Release Jan 19

By Jamie Satchithanantham

     LONDON (MNI) - The UK's December retail sales data print will be released

Friday, when we will learn of the sector's contribution to fourth quarter GDP.

The MNI median expectation, taken from a poll of analysts, looks for a 1.0% m/m

fall in total sales volumes and a 2.8% rise on the year.

              Dec Retail  Dec Retail Sales   Dec Retail Sales   Dec Retail Sales

             Sales Incl.    Incl. Petrol %     Excl. Petrol %     Incl. Petrol %

              Petrol m/m               Y/Y                M/M                M/M

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

MNI

Median              -1.0              +2.8               -0.8               +2.8

Prior               +1.1              +1.6               +1.2               +1.5

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

- Retails Sales Should Positively Influence Q4 GDP. 

The solid November and October outturns mean that sales volumes could fall by as

much as 3.0% in December and still leave the sector flat on Q3. The last time

sales fell in excess of 3% was in January 2010. Thus, the sector, which accounts

for 5.4% of total GDP, remains poised to exert a positive influence on fourth

quarter growth. 

- Cyber Monday/Black Friday Challenges.

November's data were window-dressed by the promotions from "Black Friday", which

has evolved from a single day event to a multiple-day or week-long affair for

some retailers. Due to the ever-changing nature of this event the ONS has found

adjusting for the associated changes in sales, in their own words,

'challenging'. A similar effect may appear in the December given it will include

all sales from "Cyber Monday", though the strong November figures will likely

offset this. The amount spent online accounted for 17% of all retail spending,

excluding fuel, in November, up from 16.1% in November 2016.

- Negative Surprises. 

The last two December retail sales readings have surprised significantly to the

downside. Since 2010, the official December retail sales numbers (both m/m and

y/y) have tended to disappoint, coming in below the market consensus on four of

the last seven Decembers. On the instances where the result was a negative

surprise, the average miss was 0.85pp for the m/m result and 1.61pp for the y/y

result. The fact that results have disappointed noticeably in the last two

Decembers likely reflects the increased number of firms participating in "Black

Friday", its growing popularity among consumers and the ONS' difficulty

adjusting for it.

- Divergence between essential and non-essential spending. 

The December BRC Retail Sales Monitor highlighted a growing divergence between

the amount spent on essential and non-essential items. In the 3m to December,

total non-food sales were down 1.4%, the lowest since March, while food sales

were up 4.2%, a six-month high. The soft data surveys effectively tell a story

of consumers keeping their food consumption broadly unchanged, spending more on

the same weekly shop, thus being forced to curb purchases of more discretionary

items. Further evidence of this trend could emerge in the ONS data, if the cost

of food remains elevated.

- Fragile Sentiment. 

Consumers' overall level of optimism remains fragile, raising concerns over how

much private consumption will contribute to growth in 2018. The December GfK

consumer sentiment index fell to its lowest level in 4 years, -13, and has

remained in the red for almost two years. Sub-components suggest that demand for

non-essential items will remain weak until we see a meaningful pick-up in real

wage growth. The Major Purchase sub-index fell to -4 in December, down from +12

in December 2016, implying increased reluctance to make a big-ticket purchase.

In contrast, the Savings Index climbed to +4 in December up from -5 in December

2016.

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

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

[TOPICS: MTABLE]