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?


Anonymous said...

Interesting, can we trust these retail numbers?

aSteve said...

It would be very interesting to look at this graph over a longer period... say 10 to 15 years.

I am entirely unsurprised that sales volumes (adjusted for inflation) are falling... I'm just surprised that it is by as little as 1% over a year.

sweep the streets said...

I don't think any price data in the UK can be trusted right now.

Anonymous said...

I can see a slowdown back in 2006. What happened then? Did I miss that recession?

Mark Wadsworth said...

Hang about here, if the price deflator is negative, then for a given £ value of sales, sales volumes are increasing.

Alice, you have to start quoting sources under the tables to save us pestering you on their provenance.

aSteve said...

:o) I ditto MarkW's plea for sources... partly because it eliminates unnecessary queries, but also because it lends an air of irrefutable credibility.

I think Alice meant that the the effect of applying a price deflator was economic contraction. I'm sure she's right - but I wasn't surprised. That's why I'd like to see this over more of history.


Bargain time? Same sales, lower prices to achieve higher volume in order to reduce stock, lower margins?

aSteve said...

I like lower prices and higher volume... it implies increased affluence... especially if it can be kept up over the long term. Stock held by companies doesn't enrich the lives of the public.

Anonymous said...

So is this the calculation?

- actual sales
- multiplied by a judgemental "deflator"
- equals reported sales

That sounds like the usual wheeze of implied precision by inserting a guess in the middle of an otherwise precise calculation.

Note GDP is done the same way, using equally dishonest deflators. I don't know the numbers well. I do know retailers are frightened of lower footfall, lots are closing, lots can't pay rent, CRE is crashing, and sales are everywhere.


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