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UK Retail Sales High Street Boom− The Truth Behind the Headlines
Fri, Jun 20 2008, 08:03 GMT
by Nadeem Walayat
In the midst of the worst economic conditions in nearly 20 years, May saw retail sales soar by a surprising annualised rate of 8.1%, the highest rate in 20 years, up 3.4% for the month. The surge is more akin to that expected during boom times rather than the bust that the UK is fast heading towards. The mainstream media immediately seized on the headline rate to announce Britain is experiencing a mini high street spending boom. However looking behind the headline figures tells a different story.
What is apparent from the retail sales figures is that the preceding 2 months experienced a contraction in sales volume, the actual average rate for the last 3 months is just 1.3, which equates to % change of just 0.9% on the month, therefore the monthly change can be put down to the under reporting of the true rate of retail sales for the months of March and April 2008, and thus resulting in the sharp jump for May 2008.
But that still does not explain the annualised rate of 8.1%, for that we need to take a look at the retail sales figures for 2007.
Real retail sales on an inflation adjusted basis have been depressed for approaching 3 years which is reflected in the poor performance of retail stocks that have under performed the stock market as a whole. Far from the highest growth in retail sales since records began, the actual real retail sales index shows retailers just about managing to keep their heads above water.
Therefore a valuable lesson is not to take and run with the monthly headline figures as much of the mainstream media right from the BBC downwards mistakenly appears to have done so with May's retail sales figures.
The current real rate of 1.2% is still expansionary and implies that a UK recession is not imminent and thus in line with the Market Oracle forecast for UK GDP growth of 1.3% for 2008.The key to watch for in the coming months will be if real retail sales go negative on an annualised basis from the current rate of 1.2%, which will be a sign of major distress amongst high street retailers regardless of the totally unrepresentative headline rate.
Published on Fri, Jun 20 2008, 08:03 GMT
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