Friday, December 24, 2010

Economics 24/12/10: Retail Sales for November

Retail sales stats were out this week, prompting the usual 'upbeat' comments from the official analysts.

Here's an example from one bank analyst (emphasis is mine):

"November retail sales figures show a second consecutive monthly increase in sales volumes. The 0.2% rise last month followed a 0.3% monthly gain in October, representing the first back-to-back monthly increases since March/April. This leaves total sales in October/November running some 0.4% above the average level seen in the third quarter."

Oh, Mighty Aphrodite, folks. Time to pull the crackers out and funny hats? Alas, no. The quote above is so full of spin, you get dizzy after the first two sentences and by the end of the second paragraph all systems collapse is virtually inevitable. For reality is nowhere to be seen in the claims made above.

Take a look at the full seasonally adjusted figures for sales:

First, levels of sales - volume and value
Few things are worth noting:
  • November shows that we - consumers in Ireland - are purchasing 23.89% less today than in February 2008 - the peak of our retail sales volumes
  • Same figures show that we are buying 17.45% less value relative to October 2007 - the peak point in the value of sales index
  • We are now consuming some 9.2% less in terms of volume and 4% less in terms of value than in 2005
  • November 2010 index of 90.8 seasonally adjusted volume of sales is below that in November 2009 (91.8) and November 2008 (109.1)
  • November 2010 index of 96 seasonally adjusted value of sales is above that in November 2009 (95.1) but below November 2008 (106.5)

Chart above shows changes in two series mom and yoy. Three things are worth noting there:
  • Mom - both series are pointing down, with alue index going from +0.6% in October to -0.1% in November, while volume index from +0.3% to +0.2%
  • Yoy - value index going from -0.3% in October to -1.1% in November, while volume index moved from +1.9% in October to +0.9% in November
  • Yoy there has not been a positive growth month in terms of value of sales since April 2010
Our friendly economist quoted above went on in his/her note:
"As has been the case for much of the year, the overall picture is being flattered somewhat by rising levels of car sales. This was a pattern that was again evident last month, according to the CSO, as the motor trade category posted a 0.4% monthly rise in sales volumes. While modest by the standards of the stronger increases in car sales earlier in the year, this was still enough to pull total sales higher in November as core sales (which strips out the motor trade) fell by 0.2% on the month. This 0.2% fall in underlying sales followed a flat reading in October to leave core sales running about 0.5% lower than their average level in the September quarter."

Well, notice - there are no yoy references. Shall we take a look?
As above:
  • Relative to the peak (February 2008) value of core retail sales today is down 19.09%
  • Relative to the peak (October 2007) volume of core retail sales today is down 12.90%
  • There are clearly two moments - around Q1-Q2 2010 when the volumes and values of retail sales ex-motors peaked locally - prompting the very same analysts to start trumpeting the recovery in retail sales, alas, all of these 'gains' were exhausted
  • Ex-motor retail sales have reached another record lows in terms of both volume of sales and value in November 2010.

While the picture above confirms that there is little ground for optimistic reading of retail sales let's do justice to the quotes above:
  • While celebrating the first consecutive two months rise in volume of retail sales since April,
  • Keep in mind we also had (1) third consecutive month of declines in the value of core sales - the first time since December 2009, (2) 28th consecutive month of annual declines in the value of core sales, (3) 6th consecutive month of annual declines in the volume of core sales.
Looking at subcategories of sales, 7 out of 12 categories posted declines in volume mom and 8 out of 12 yoy. In value terms these figures were 7/12 and 9/12 respectively. In October 2010 we posted 9th worst performance in retail sales volumes in EU27 and 5th worst in Euro area 16.
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