Wednesday, September 1, 2010

Economics 1/9/10: Retail Sales

Today's retail sales figures continue to provide the backdrop to my previous analysis of the Irish economy as the one still facing strong headwinds and showing no real signs of a recovery. After months of 'turning the corner' statements (by now clearly deserving to be serialized in The Simpsons or perhaps in the Sponge Bob) and the drone of the ESRI data on 'consumer confidence' improvements, people still continue to vote by withdrawing their spending.

Here are the charts and the results.

Overall volume of retail sales (i.e. ex-price effects or ex-deflation that is ruining retail sector jobs that is) contracted 0.1% yoy in July 2010. There was a monthly decrease of 0.2% - steeper than the annual decrease. We now have 3 months of continued declines.

Ex-Motor Trades the volume of retail sales shrunk by an impressive 2.5% in July 2010 yoy and -1.0% mom. Year-on-year and mom volumes rose in Motors, Fuel and Food, and decreases in everything else.

Stop for a second and think. Volume is just the bulk of stuff we buy. If the retail sector were to stop losing jobs and start growing again, increased volumes of sales (not that we have them anyhow, but give it a thought nonetheless) must be accompanied by non-falling value of sales.
Oops... the value of retail sales collapsed by 3.2% in July 2010 yoy and fell -0.6% mom. Ex-Motor Trades things were even worse: sales values fell 4.9% yoy and -0.6% mom. In fact, per CSo own admission: "only Motor Trades and Fuel showed year-on-year value increases in July 2010. All other sectors showed year-on-year declines in the value of retail sales" And boy these declines were rather large:
  • Non Specialised Stores (-1.5%)
  • Department Stores (-7.3%)
  • Pharmaceutical Medical & Cosmetics (-10.6%)
  • Clothing, Footwear and Textiles (-5.7%)
  • Other Retail (-8.8%)
  • Bars (-13.8%)
In mom terms, Motor Trades, Non-Specialised Stores and Electrical Goods showed increases in
the value of retail sales in July 2010. All other sectors showed mom value decreases in July 2010.

Now, these are not the results of 'improving consumer confidence' are they?

Overall, retails sales suggest that Q2 consumer spending will be a likely positive contributor for GDP growth, but Q3 will do the opposite. Of course, there is a catch here - the RSI data covers only sales of goods, but not of services, yet consumption expenditure on the latter accounts for 55% of the total consumption spending. Indications are - based on Live Register results showing contraction in services employment - services sales might be even weaker. Another sign of hidden weaknesses is in the ex-Motors sales. Ex-Motor volumes posted Q1 growth of 1.2%, followed by a preliminary estimate of 1.1% growth in Q2. The latter has been now revised down to a miserly 0.3% for Q2. Since then, ex-motor sales have been falling in both July and August.
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