UK retail sales cycle

Friday, February 16, 2007 | | 1 comments »

Headline writers had a shock-and-amaze-on-every-page item with yesterday’s poorer than expected UK January retail sales data. Yet a graph on the website of the Office for National Statistics, whose data it is, belied the drama.

Exhibit 1: UK Retail Sales growth

Seasonality is at play; and the trend does not look bad.

However, a picture of a longer run of data (excluding food) with a couple of additional data items is less sanguine.

Exhibit 2: UK non-food retail sales, mortgage rates and real disposable income 1989-2007 (click to enlarge)

The last data point is noteworthy in that quarterly non-food retail sales growth has not, on this graph’s timescale, ever been so robust whilst real disposable income is at what appears to be a trough-level low: quarterly retail sales growth is, in fact, comfortably and curiously above its 4 period average despite the trend in disposable income.

Looking ahead, energy bills are forecast to drop and recent pay settlements have been generous. Real disposable income rises on this scenario. But with recent peak-to-trough retail sales cycles running at 15 to 18 months such a crutch might be short-lived: the last trough was in Q2 2005.

The bidding up of sterling bonds looks about right.

Sources: Office for National Statistics; Her Majesty's Treasury Pocket Databank, 13/02/2007

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  1. Charles Butler // 2/19/2007 01:37:00 AM

    But with bond prices/yields apparently having severed any relationship with knowable reality for the last x years (at least as far as the longer durations are concerned), an exit strategy would be a nice touch, for the record - especially given the eight pounds of peanut butter LLG is going to have to start chewing through at 108.

    An extra serving of that tasty spread, btw, for your recent response to the nameless heckler. What sanctuary anonymity?


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