Thursday, December 22, 2011

22/12/2011: Retail Sector Activity Index: November 2011

I covered detailed retail sales for November data in the previous post (link here). Now is the time to update the Retail Sector Activity Index.

It is worth noting that my Retail Sector Activity Index for October has predicted November moderate uplift in sales - a nice surprise for the index just created:
"A large jump in consumer confidence in October (to 63.7 from September reading of 53.3) is the core driver of improvement in the overall Index od Retail Sector Activity, which now stands at 102.2 - above the expansion level of 100. This means that we can expect a small uplift in retail sector activity in months ahead, but this uplift can manifest itself through improved volumes of sales (value static, so margins declining) or improved value of sales (inflation) or both (more demand-driven uplift)."

As shown in my detailed analysis (linked above), the retail sales did indeed improve in November, and the improvement took place across all three possible drivers (depending on specific areas of sales):
" Only notable increases yoy are in Non-specialized stores ex-Department Stores (where inflationary pressures drove value up 1.4% while volume was up only 0.5%), Fuel (where inflation was so rampant that value of sales rose 10.3% while volume of sales fell 3.7%) and Electrical goods (where season sales started early and cuts were running deep with value +0.5% and volume up 7.5% yoy). Everything else was either down or flat."

So now to that data update:

  • Retail sales (core) volume index rose to 100.6 in November from 98.8 in October. 
  • Retail sales (core) value index rose from 94.6 in October to 95.6 in November
  • Consumer confidence, however, declined from 63.7 in October to 60.1 in November.

The above implies that RSAI have dropped slightly from 108.64 in October to 107.96 in November. Dynamics however remain encouraging for continued firming up of sales:
  • RSAI November reading is 3% ahead of 3mo ago, and 5.33% above the reading a year ago.
  • 6mo MA now stands at 105.94, ahead of previous 6mo MA of 104.91, signaling what can be a moderate uplift.
  • For comparison, 2006-2007 average is 125.41.
Charts to illustrate:

Medium-term, however, the indices remain below historical trends, with more firm confidence still failing to drive up retail volumes and values:
In other words, structural weakness in the sector remains unchanged. It will take couple of months of solid gains in retail sales (annual gains of 1.5-2% minimum per month) to deliver signs of real structural improvement.

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