UK: Likely fall in sales volumes of 0.4% m/m in August - RBS

Research Team at RBS, notes that the UK retail sales volumes (including auto fuel) rose by a superficially robust 1.4% m/m in July led by a rebound in non-food categories, notably department stores and clothing (following sizeable falls in June).

Key Quotes

“The data are notoriously volatile month-to-month and it appears that there has been some variation in the timing of retail activity over the summer months. We continue to draw attention to the important disparity between relatively sluggish nominal spending (2.5% 3m y/y) and more buoyant real-terms or volumes estimates (5.2% 3m y/y).

In other words: the amount of money actually being spent continues to grow at rates significantly below trend; the quantity of goods being acquired is more buoyant. Hence, volumes estimates (the headline data) only look buoyant as a result of acute price deflation (-2.7% 3m y/y).

BRC data were rather sluggish in August – especially given that base effects did not look particularly challenging. BRC total sales growth fell 0.3% y/y (vs 1.9% in July). The BRC suggested that the Olympics and warm weather resulted in a preference for leisure activities rather than shopping (growth in food sales was fractionally higher at 0.9% 3m y/y whereas non-food spending slowed to 0.4% from 1.4%).

BRC shop price index showed more acute price deflation in August: -2.0% y/y vs -1.6% in July, which hints at a partial boost to sales volumes. On the official data we forecast a fall in sales volumes of 0.4% m/m in August (including auto fuel), lowering the y/y rate to 5.4% and growth in the latest 3 months to 1.2% from 1.8%.”