“Club of Knowledge Hunters”

Surprise rise in UK retail sale

Posted by superstar23 on September 21, 2008

Retail sales registered a surprising 1.2 per cent rise between July and August, defying the gloomy picture painted by retailers and a variety of surveys of business sentiment.

According to the Office for National Statistics, clothing and footwear drove retail sales higher. But the data are inconsistent with figures from the CBI employers’ group, the Bank of England’s monthly Agents’ survey, and anecdotal evidence from retailers, most of whom say they are struggling. The ONS itself noted retail sales data could be very volatile.

Indeed, the Bank’s agents’ survey for August, released this week, showed a drop in retail sales for that month after being flat overall for some time, amid signs that consumers are reining in discretionary spending. The agents reported a drop even in items that had seen strong sales recently, such as electrical goods.

The ONS data stand in sharp contrast. “These numbers are still puzzlingly strong compared to the much gloomier message coming from the retail surveys, consumer confidence figures and anecdotal evidence,” said Jonathan Loynes, economist at Capital Economics. “As such, we suspect the [Bank’s] monetary policy committee will treat them with a pinch of salt when considering the overall strength of the household sector.”

Several aspects of the latest data are inconsistent with other information, according to Michael Saunders, economist at Citi. For instance, the latest retail sales deflator – an inflation measure – slowed significantly, even though official ONS numbers show CPI inflation rising sharply.

Also, the reported strength in sales of clothing, footwear and household goods alone was so great in August that this category would appear to account for about 80 per cent of the growth in nominal retail sales measured on a year-on-year basis. According to the official data, non-store retailing and repair – a category that includes internet sales – rose 0.8 per cent in the three months to August and has remained consistently the category showing the strongest growth since March.



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