Thursday, 22 May 2008
Retail sales - up or down?
Is the UK economy slowing down? The latest retail sales data shows only a marginal drop-off of volumes. In April, volumes were up 4.2 percent compared to the same month last year. It is a slower rate than January this year, but if these numbers are correct, shoppers are still out there buying and keeping the economy growing.
However, I saw another strange data series - the retail sales price deflator. In order to obtain a volume number, retail sales needs to be adjusted by prices. This is done with a price deflator.
However, the retail sales deflator (i.e. retail prices) has been negative for months. This was something of a shock to me. In my supermarket prices are growing at a rapid clip.
If sales data was deflated by a price series growing at the same rates as the RPI i.e. by 4 percent, then sales volumes would be almost zero.
So are retail sales actually growing. I don't think so. Perhaps, the economy is drifting into recession as consumers give up.
Comments anyone? What is happening in your supermarket. Are prices falling as the retail price deflator suggests?