28/8/15: Core Retail Sales for July: Less of a Cheer, More of a Smile

With much of hullabaloo around it, the Retail Sales figures for July were published today. The CSO headline on the matter read: "Retail Sales Volume increased by 11.6% in July 2015". Which is, of course, correct... to a point. The figure references sales inclusive of automotive sales. And it references volumes of sales.

So here are the actual retail sales figures, for retail sales excluding motors.

First, consider seasonally-adjusted sales allowing m/m comparatives:

• Value of core (ex-motors) retail sales increased 0.3% m/m in July and this only partially (albeit substantially) corrects for 0.3% decline m/m in June. Compared to 2005 average level, value of sales today is only 1.09% higher, which is... before inflation is factored in. 3mo MA of Value indices in July was down 0.03% on 3mo MA average through June, while a month ago the same was 0.7% higher. In other words, there is nothing 'convincing' in the value of sales data. And this is concerning, because retailers don't get their revenues and profits from volumes of sales. They get them from value of sales.
• Volume of retail sales (ex-motors) was up 0.64% m/m in July, having previously posted a decline of 0.12% in June. So July volumes of sales significantly over-compensated for June decline. Which is good news. Compared to 2005 average, July figure is 12.1% higher for the volume of sales, which means that deflation has resulted in more sales by volume, but barely any change in value: selling more stuff but getting less per unit sold is the retailers' margin nightmare and it has been going on for some years now. But the good news on Volume run out when you consider 3mo MA: 3mo MA through July was down 0.12% compared to 3mo MA through June, having previously been up 0.7%. So on 3mo MA basis (smoothing a bit volatility) value and volume of retail sales both fell in July.
• Meanwhile, the never-ending exuberance of Irish consumers, as measured by Consumer Confidence Index posted some moderation in July, falling 3% m/m. Still Consumer Confidence in July 2015 is 97% (that's right - 97%) higher than the 2005 average. You really gotta wonder...

Two charts to illustrate the above trends:

As can be seen from the chart above, there is now divergence in the series for Value (rising slower) and Volume (rising faster) of core retail sales. This, with Value of sales running now persistently above the trend (suggesting risk of downward correction in the future), whilst Volume series running along the trend. Volume is converging with Consumer Confidence, while Value is diverging. Closer look at the latter next:

 And now to y/y data based on unadjusted series:

Per data charted above y/y changes were:

• Value of core retail sales rose 3.40% y/y - which is a good performance, but not exactly stellar. In June, y/y increase was 2.0% and in July 2014 y/y rise was 1.2% which means this July growth was stronger. However, pre-crisis average y/y growth rate in Value of retail sales was 6.93% and this means that current rate of increase is just under 1/2 the rate of average rise in pre-crisis years. Smoothing out some volatility, 3mo average through July was 99.3 which is stronger than 3mo average through April 2015 (93.6) and is up 3% on 3mo average through July 2014. These are good figures, no arguing there.
• Volume of retail sales, predictably, was up 6.7% y/y in July - double the rate of growth in Value of sales and above the pre-crisis average rate of growth of 6.2%. Volume of sales gained in July in annual rate of growth compared to June (4.7%) and compared to July 2014 (3.2%). And on 3mo average basis, the index was up 6% y/y for 3mo through July - double the rate of growth in Value.
• Hence, overall we have the same picture in unadjusted data: rates of growth in Value of sales are healthy, but not spectacular, while rates of growth in Volume are strong. Volume is diverging from Value and there is nothing new here - it has been thus since the end of 2013.

Good news is that on 3mo average basis, May-July 2015 figures were

• Positive in y/y terms for majority sub-sectors in value terms (excluding Food, Beverages & Tobacco and Motor Fuel) and for all sub-sectors in volume terms
• The picture was a bit more fragmented for 3mo change through July compared to 3mo change through April, as shown in the table below.

Thus, overall, there are some good news in the retail sales figures. Do they warrant a huge wave of congratulatory backslapping exercises in the media? No. Do they warrant much of optimism that the sector is experiencing a big revival? Not exactly. 

30/5/15: Irish Retail Sales: April

Some good news on Irish retail sales side for April with latest CSO data showing seasonally adjusted core (ex-motors) sales up 2.65% m/m in April in Value terms to 100.6 index reading - the highest since September 2008. Remember - value series have been lagging far behind the volume series. April 2015 m/m increase comes after 0.31% contraction m/m in March and is a strong signal of a positive momentum returning to the sector.

Volume series continued to perform strongly, jumping 3.07% m/m in April after disappointing 0.65% drop in March. The series now stand at 110.7 which is the highest since July 2007.

Strengthening of the positive correlation between volume (and now also value) of core retail sales and Consumer Confidence indicator is also signalling that we are on an upward trend (remember, Consumer Confidence indicator is pretty useless in timing actual trend reversals, but performs pretty well in tracking trends). Still, rate of increase in consumer confidence indicator is out-pacing increases in retail sales on 3mo MA basis.

3mo MA for Value of core retail sales is up 0.95% compared to previous 3mo period and Volume series 3mo average is up 1.78%. Both series posted declines in 3mo average in March.

As the result of April changes, Value of core retail sales was up 3.16% y/y and Volume of retail sales was up 6.67% y/y - both strong indicators of a positive trend.

Couple of points of continued concern:

• y/y increase in Value (+3.16% in April 2015) is slower than y/y growth rates posted in the series in April 2014 (4.4%) with Volume growth rates basically identical.
• Compared to peak, 3mo average through April 2015 is down 40.6% for Value of sales and down 34.8% in Volume of sales, so there is still much to be done to restore the sector to full health.

On the net, however, the figures are healthy and strong, and very encouraging.

30/4/15: Consumer Confidence Boom in April... or Hopium by Pints

Ah, that slightly delirious Consumer Confidence data from Ireland keeps getting more and more delirious. April reading for the ESRI-compiled, KBC-sponsored, Consumer Confidence indicator was 98.7, up on 97.8 in March and the second highest reading since January 2005. The highest was in January 2015.

So now we have: on a 3mo average basis, 3 months through March, retail sales shrunk 0.2% in value terms and rose by 1.07% in volume terms. But in 3 months through April 2015 consumer confidence was up 5.7% (we have data lags here, so looking at latest data). And it gets worse: compared to January 1, 2015, retail sales by value are up 1.4%, down by 0.74% in volume, and consumer confidence is up 9.1%.

Hopium deliveries going strong nowadays...

29/4/15: Irish Retail Sales 1Q 2015

As I mentioned in a related post (http://trueeconomics.blogspot.ie/2015/04/28415-irish-retail-sales-march-2015.html), covering monthly data for Irish retail sales, last night, we can take a look at Q1 data comparatives for the sector based on 3mo averages for each corresponding quarter.

Here are the results y/y:

Good news is that overall only two sectors posted declines in Value of retail sales index in 1Q 2015 compared to 1Q 2014. These are both related to the decline in prices of fuel and wholesale prices declines for the Department Stores sales. All categories posted increases in volume of sales.

Large y/y increase in sales were recorded in 1Q 2015 in:

• Motor Trades: up 22.7% in volume and up 20.6% in value of sales
• 'Other sales': up 15.8% y/y in volume and up 6.8% in value
• Books, newspapers, stationery & other: up 13.8% y/y in volume and up 5.7% in value
• Household equipment: up 11.8% in volume and up 7.1% in value
• Electrical goods up 11.8% in volume and 6.1% in value

As the result of this, Non food, ex-motors, auto fuel & bars sales rose 8.3% in volume and were up 3.6% in value terms compared to 1Q 2014. Food posted weaker sales growth at 4.2% y/y in volume and 2.3% in value.

Note: Retail Sales Activity Index is a simple average of Value and Volume indices

As chart above shows, in broader categories terms,

• All Retail sales index of value of sales rose 6.1% y/y in 1Q 2015, while volume of sales index was up 9.9%. Strong showing driven heavily by the motor sales.
• Core retails sales (ex-motors) were up 1.3% y/y in value terms and up 5.2% in volume terms in 1Q 2015.
• Stripping out motors, automotive fuel and bars, retails sales rose 2.8% in value terms and were up 6.0% in volume terms. Again, strong showing over the quarter.

Chart below presents 1Q 2015 index reading against pre-crisis peak for 1Q period:

As the chart above clearly shows, the problem of weak retail sales, compared to pre-crisis levels, remains. Only three categories of sales have regained their pre-crisis peaks as of the end of 1Q 2015 in volume of sales terms. No category of sales has managed to regain pre-crisis peaks in value terms.

In discretionary spending categories terms, relating to normal consumption (stripping out auto fuel, food and motors), things remain under water in both volume of sales and value of sales terms. So things are getting better, but remain ugly in the sector.

The picture for 1Q 2015 is consistent with weak, but improving demand side in the economy.

This positive side of the National Accounts story is at risk, as it reflects deflationary environment where households are experiencing improved real incomes on stagnant wages and disposable nominal incomes. Any uptick in inflation can easily derail the recovery in the sector in terms of volumes of sales, if consumers start withdrawing their demand on foot of reduced opportunities for value shopping. Any uptick in inflation coupled with a rise in interest rates will present a double squeeze on consumer demand through reduced real incomes and reduced incomes available to fund consumption after housing and debt financing costs are taken into account.

28/4/15: Irish Retail Sales: March 2015

So the Spring Statement (http://trueeconomics.blogspot.ie/2015/04/28415-there-is-spring-there-was.html) put quite an emphasis on domestic demand growth, while the retail sales data published today is not exactly encouraging.

Stripping out motor sales, and focusing on core retail sales:

• Seasonally adjusted index for value of retail sales fell from 98.0 in February 2015 to 97.1 in March 2015. March reading is now the lowest  for 6 months and below the 3mo average (1Q 2015 average) of 97.7.
• Seasonally-adjusted index for volume of retail sales also fell from 107.6 in February to 106.6 in March, posting the lowest reading in 4 months.
• Meanwhile, Consumer Confidence indicator from the ESRI was up in March at 97.8 compared to February reading of 96.1.

Some more longer-range comparatives: in 4Q 2014, value index was up 0.2% compared to 3Q 2014, but in 1Q 2015 it was down 0.48% on 4Q 2014. In 4Q 2014, volume index was up 0.69% compared to 3Q 2014, but in 1Q 2015 it was down 0.25% on 4Q 2014. Again, as with monthly changes, 1Q 2015 3mo average for consumer confidence index was up 2.54% which is below 3.9% increase in the index for 4Q 2014 compared to 3Q 2014.

Looking at unadjusted series gives us year on year comparatives basis. So again, for core retail sales (ex-motors):

• Value of retail sales was up 2.34% y/y in March 2015, having previously posted a 0.77% rise in February. A large chunk (just around 1/3rd) of March 2015 increase was down to March 2014 y/y drop of 0.77%. But 2/3rds of March 2015 rise were due to organic growth. Which is good.
• Volume of retail sales rose robust 6.1% y/y in March 2015, having posted growth of 5.04% y/y in February.
• On 3mo average basis, 1Q 2015 value index is at 91.2 which is up 1.3% y/y - again, good news, as value index performance has been weak due to weak prices. Volume 1Q 2015 index was up 5.2% y/y. As usual, Consumer Confidence broke the back of both retail sales indicators, rising 15.1% in 12 months through 1Q 2015.

Summary: People are hopping mad with confidence, buying rather more stuff in volume, but only on foot of finding value in prices. This is not too boisterous, but on the net not too bad either. Monthly trends are a bit more concerning with declines in both March figures and 1Q 2015 averages.

I will look at sectoral comparatives in the next post.

2/4/15: Irish Consumer Sentiment and Expectations: March 2015

In recent months, Irish Consumer Confidence Index (officially known as Consumer Sentiment Index and prepared and published by the ESRI) has been re-establishing sufficiently strong positive correlation with retail sales data, which warrants its re-inclusion in my coverage of the Irish economy as a stand alone series to track.

Hence, this more in-depth than usual analysis of dynamics in the Consumer Sentiment data.

March 2015 reading for the headline Consumer Sentiment Index came in at 97.8 up on 96.1 in February, but still below 101.1 registered in January. January reading was the highest since February 2006 (109 months high) and March reading is the second highest reading since May 2006. So by all measures, consumer confidence is booming in Ireland.

March reading is almost on par with pre-crisis average (through December 2007) which stands at 99.2 and significantly above the average for the period from January 2012 through present (the recovery period) which stands at 71.8. Year on year, index is up 14.8 points.

Given January reading, the 3mo MA through March is now at 98.3 - the highest 3mo MA reading since March 2006.

These levels of sentiment are simply not consistent with the retail sales data, as I noted before, but are close to the longer-term trend and consistent with the recovery. In addition, volume of retail sales index is now co-trending with consumer Sentiment index as covered here: http://trueeconomics.blogspot.ie/2015/03/27315-irish-retail-sales-february-2015.html - a pattern that was established around July 2013.

The elevated level of y/y rises in Consumer Sentiment Index, set on from December 2013 is a positive indicator of firming up volume activity in consumer demand, although not as strong of an indicator, yet, of the value of consumer demand. If the value of retail sales starts to catch up with consumer confidence, we are going to see significant boost to the domestic demand side of the National Accounts in later quarters of the year, pushing economic growth away from the questionable external trade stats and in favour of more domestic growth.


Index of Current Economic Conditions meanwhile, rose to 110.0 in March from 107.2 in February. This marks the second highest reading for the index since March 2006, with the highest reading recorded in January 2015 at 112.8. Again, index reads boom-time territory. It is only 16.8 points below all-time high and just 2.9 points behind post 2006 high. Current reading is up 19.6 points year on year - strong growth - strongest since April 2014. And index 3mo average though March is at 110.0 which is also the second highest 3mo average for the index from March 2006.

Again, the recovery is clearly visible in y/y growth rates starting from December 2013 and index readings are now above pre-crisis average.


Index of Consumer Expectations is showing more subdued increases, rising to 89.6 in March from 88.6 in February. However, as with other two indices, Consumer expectations currently sit at the second highest reading from May 2006, with the highest reading recorded in January 2015 at 93.2. Year on year index is up 11.5 - the slowest increase in 3 months and second slowest rise in 8 months. Still, 3mo average though March 2015 is now at the highest level for 3mo average series since March 2006.

Consumer Expectations, for now, remain below pre-crisis average, but trending up strongly, with elevated y/y rises from December 2013. Slight issue is - per chart above, y/y increases, while remaining strong, are now trending down off Q3 2014 highs.


Overall, Consumer Confidence indicators discussed above suggest full reversion of consumer sentiment and expectations to pre-crisis conditions. Much of this will have to be tested in more normal inflation environment in the future and I am not sure this confidence will be sustained then (higher inflation is likely to cut back on consumer purchases and expectations, while associated higher interest rates are likely to severely impair demand).

In other words, stay tuned for more regular analysis of the series in the future.

16/9/2014: Allegedly, Irish Consumers Have Pulled Back Spending in August

It is with some puzzlement that I read the following tweet:

Being aware that there has not been any new data on retail sales or consumer demand issued today, I opened the link: http://www.independent.ie/business/irish/irish-households-pull-back-in-spending-last-month-new-figures-show-30590499.html

It turns out that the 'pulling back' of 'spending' is really a 'pulling back' of consumer confidence.

And indeed, as chart below shows, Consumer Confidence reported by the ESRI fell from a very high reading of 89.4 in July to 87.1 in August:

Now, we do not have August data for retail sales yet. And these may or may not have fallen. But Consumer Confidence decline has preciously little to say about the actual household spending or consumer demand or retail sales. Especially in the medium (3 months and over).

Take a look at data we do have:

• In January 2014, Consumer Confidence rose m/m strongly, but seasonally-adjusted retail sales barely rose in value terms and strongly shrunk in volume terms.
• In February 2014, Consumer Confidence rose again strongly, but seasonally-adjusted retail sales remained unchanged in volume terms and fell strongly in value terms.
• In March 2014, Consumer Confidence moderated significantly, and retail sales fell in volume and value terms.
• In April 2014, Confidence rose dramatically and both volume and value indices of retail sales rose as well. 
• In May 2014, Confidence indicator tracked both retails sales indices to the downside.
• In June 2014, Confidence tracked volume and value of retail sales to the upside.
• In July 2014, Confidence rose dramatically, but retail sales shrunk in both volume and value terms.

So in last 7 months, Consumer Confidence changes tracked changes in actual consumer demand in 4 and did not track demand in 3. That is hardly a record to base any conclusions on. But historically things are even worse.

The chart above shows that Consumer Confidence historically shows a weak relationship with the Volume of Retail Sales and a very weak relationship with the Value of Retail Sales. Worse, these weak relationships fall to nil - or vanish completely - for quarterly readings:

So whatever KBC lads might say, ESRI Consumer Confidence does not indicate that households pulled back their spending in August. It might, however, suggest that consumer are not expressing same levels of enthusiasm about their current prospects and this might mean they could have pulled back spending. 

28/6/2014: Irish Retail Sales: Q2 data to-date confirms fragile recovery

In the previous post I covered detailed analysis of Core Retail Sales data for May 2014: here. Now, a quick look at Q2 averages (for 2014 we have average over April and May) for the period from 2005 through latest.

Take a look at the chart plotting declines (as of April-May average) in retail sales activity compared to peak for Q2 data:

This data shows the following:

1. The only two sub-categories of goods and services where retail sales indices in Value terms are in shallower decline than in Volume terms (in other words inflation is positive and feeding through to consumers) are: Automotive Fuel and Bars - in other words two sectors where prices for inputs are largely controlled/set by the state.
2. No category has recovered pre-crisis levels of retail sales by both value and volume, while only one category (Food) recovered sales in volume, relative to pre-crisis activity.

This puts into perspective the extent to which the recovery we are experiencing so far is fragile. 

28/6/2014: Irish Retail Sales Activity: May 2014

There is a lot of hoopla about Irish retail sales stats released today by CSO. Irish and foreign media and even some analysts are quick to point to the headline numbers showing high rates of growth and some are going as far as describing Ireland's miraculous recovery. So what, really, is going on?

First of all, let's consider top level numbers: removing motor trades and fuel, Core Retail Sales:

• In Value Index terms, things have improved, which is a positive - so far in the crisis, value of sales trended well flatter than volume of sales primarily due to deflation in the sector. This was good for consumers, but bad for businesses as profit margins shrunk and with them, employment declined too. In May 2014, value of retail sales index rose to 94.6, up 1.39% y/y. Good news for retailers. Even better news: 3mo MA through April 2014 is up 1.7% y/y and 6mo MA is up 1.4% y/y. All in, we are seeing some fragile gains here.
• Also in Value index terms, this time around based on seasonally-adjusted data: month on month things are not so good: index is down 0.31% on April. So short-term, things are not better this time around. Not to panic, of course, as they are volatile and as trend remains up, albeit gently and unconvincingly so far (see first chart). We are bang-on on the trend now.

• In Volume index terms, the index is under performing recent trend, but is still pointing up on average. Although m/m index is down 0.48%, year-on-year volume of sales is up 3.33%.
• 3mo MA through May 2014 compared to 3mo MA through February 2014 is up 3.7%, stronger than Value index, implying potentially lower margins. Year on year 3mo MA is up 3.33% a notch slower than 3.36% 6mo MA on previous 6mo MA.

My Retail Sector Activity Index (RSAI) capturing simultaneously Value and Volume Indices, plus Consumer Confidence, reported by the ESRI has moderated from 111.0 in April 2014 to 110.6 in May 2014. Year on year, the RSAI is up strongly, from 101.4 back in May 2013, but on shorter-run horizon, the index is just about at the levels set in February-March 2014.

Top conclusions: All of the above are good readings, suggesting that while deflationary pressures remain a challenge, core retail sales have been improving. In previous months' posts, I noted that in my view, we are now on an upward trend in terms of Volume and at the start of a more cautious upward trend in Value terms. May data confirms this, as does the chart below showing current y/y growth compared to pre-crisis historical averages.

April 2014 reading for Volume touched just above the pre-crisis average growth rate (not the levels), this moderated back in May. Value index growth rates remain disappointingly below those recorded before the Great Recession.

In terms of levels, Value index (3mo average through May 2014) is currently 41% lower than historical peak levels and 13.8% below pre-crisis average. Volume index is 37.5% below its historical peak and 8.6% down on pre-crisis average.

30/5/2014: Detailed Analysis of Retail Sales for Ireland: April 2014

In the previous post on Retail Sales data, I covered Q2 comparatives across the years (http://trueeconomics.blogspot.ie/2014/05/3052014-that-state-sanctioned-inflation.html). As promised, here is April data taken on a monthly frequency.

There are several very interesting developments in terms of core retail sales data released earlier this week by CSO. Stay patient as I cover it.

Firstly, from the top level:

• Current 3mo average for Retail Sales by Value index is at 96.7, which is below 96.9 average for the 3mo period through January 2014. Bad news. However, a ray of sunshine: Value Index did rise on seasonally-adjusted basis to 97.3 in April compared to 95.9 in March.
• Current 3mo average for Retail Sales by Volume index is at 102.5, which is virtually unchanged on 102.4 average for the 3mo period through January 2014. Neither bad not good news. However, another ray of sunshine: Volume Index did rise on seasonally-adjusted basis to 103.3 in April compared to 101.7 in March.
• Meanwhile, Consumer Confidence index reported by ESRI averaged 85.3 in 3 months though April 2014, which is blisteringly higher than 78.5 reading recorded across 3 months through January 2014. Bad news: on shorter 3mo average basis, Consumer Confidence continues to go boisterously where actual retail sales are not daring to move.

Chart to illustrate:

Notice the following from the chart above:

1. Bottoming out on trend in Consumer Confidence took place around Q1 2011. Bottoming out in Volume Index of Retail Sales took place around Q2-Q3 2012. Bottoming out in Value Index of Retail Sales is yet to be established, though it appears that it might have happened around Q4 2013. Thus, Consumer Confidence can at best be a weak indicator for changes in Volume and counter-predictor to changes in Value of Retail Sales
2. Consumer Confidence is rising much faster, over sustained period of time, than Volume of Retail Sales which itself is outpacing Value of Retail Sales. In other words, even massive and sustained reductions in the retail sector margins are not being able to explain in full the boisterous dynamics in Consumer Confidence.

Now onto my own Retail Sector Activity Index (RSAI), which is a weighted average of 3mo MAs for Volume and Value of Retail Sales Indices and Consumer Confidence:

Couple of things worth noting:

1. RSAI shows, finally, a breakaway from the flat trend that held the sector down between 2009 and much of 2013. This is good news. The RSAI is now at 111.0 up on 110.6 in March 2014 and on 3mo MA basis it is up from 107.7 over 3 months through January 2014 to 110.7 currently.
2. RSAI in most recent two months has been visibly slowing down in the rate of growth, despite massive rises in Consumer Confidence. This can signal some weakness coming down the road. Or it might signal temporary slowdown (remember, this is seasonally-adjusted data).

Lastly, let's revisit correlations between various indices. Three tables below summarise:

Core takeaways from the above tables:

• Consumer Confidence Index (CCI) has now moved into correlation range with Volume of sales that is similar to the one observed prior to the crisis: 0.757 vs 0.741 and this correlation is no longer negative. This confirms what I said above in the analysis of the first chart. And this is potentially good news, as it suggests firming up of the upward trend in the Volume of sales.
• Consumer Confidence Index remains weakly correlated with Value of Sales (0.393) as compared to pre-crisis (0.720), but it is now also positive as opposed to crisis period readings. This means, as I said above, that it is probably too early to call growth trend in Value series, but it is now time to watch the series closely for confirmation of denial of such trend.
• Much of the RSAI index performance is skewed by the CCI presence in the series computation. Still, the index tracks much better the Value and Volume activity in the Retail Sector than the CCI.

8/1/2014: Weakness in Retail Sales extended into November 2013

Retail sales data was out for November 2013 today. Here's the top of the line analysis:

• On seasonally-adjusted basis, core retail sales (ex-motors) posted a slight rise in value of sales from 95.5 in October to 96 in November. 
• Year-on-year value of retail sales (ex-motors) are down 0.1%.
• Core retail sales in volume terms stood at 101.4 in November, up of 100.1 in October.
• Year-on-year volume of retail sales index rose 1.6%
• Meanwhile, the ESRI Consumer Confidence indicator declined to (still massively optimistic) 71.0 in November from 76.2 in October. A year ago, the CCI was at 63.8.

3mo period through November 2013 compared to 3mo period through August 2013:

• Value index marginally down at 95.6 against 96.1 prior;
• Volume index marginally up at 100.5 against 100.4;
• Consumer confidence index up robustly at 73.4 against 68.5 prior

Thus, in the nutshell, Consumer Confidence rose over the year, while retail sales  basically stagnated. 

My own Retail Sales Activity Index:

• On 3mo basis up at 105.6 in September-November 2013 against 103.9 in June-August 2013;
• Up 0.54% mom - in line with 0.52% rise in Value index and up 2.75% y/y

It is worth noting that stripping out motor trade, automotive fuels and bars,

• Value of retail sales fell 0.98% in the 3mo through November compared to 3mo through August
• Volume of retail sales rose 0.06% in the 3mo through November compared to 3mo through August

The above suggests that p[rice reductions in there entail sector in September-November 2013 had no effect on increasing retail sales, compered to the 3 months of June-August 2013.

1/11/2013: Irish Consumer Confidence: Handle with Caution...

Having written just yesterday about Retail Sales for September 2013 (see here: http://trueeconomics.blogspot.ie/2013/10/31102013-i-am-sorry-but-retail-sales.html) I can now update the Consumer Confidence reading to October.

In October, Consumer Confidence indicator rose to 76.2 from 73.1 in September. This is the 10th highest reading for the index since April 2005 and the highest in 76 months since June 2007. If it were indicative of anything, we are sitting on a cusp of a consumer demand boom.

However, problem is that Consumer Confidence has a negative historical correlation with Retail Sales over the period of current crisis: correlation between Consumer Confidence and Value of Retail Sales since June 2008 is -0.663 and with Volume of Retail Sales it is -0.599. In other words, according to data, higher consumer confidence has been associated with lower retail sales (consumer demand).

Here's an illustration, updated to October for Consumer Confidence figure...

So caution, please, with interpreting Consumer Confidence.

31/10/2013: I am sorry, but Retail Sales did not get any better in September, again...

With some lag, time to update Irish Retail Sales stats to September data. Instead of going over the usual details of the dynamics, let's take a broader look at what is happening in the sector:

Starting with a chart:

As above clearly shows, both the Value and the Volume of core retail sales are going nowhere - the series are bouncing along the bottom, switching direction almost on month basis. This suggests that

1. Consumers are not going to the shops anymore than they absolutely need to; and
2. Consumers are running out of money to spend on things they need to purchase, while retailers are running out of margins to cut prices.

Of course, you would also notice in the above chart the absolutely bonkers behaviour of Consumer Confidence indicator. And you are right: as chart below clearly highlights, the Consumer Confidence has completely detached itself from Retail Sector realities:

Timing the start of the crisis to late the start of 2009 (if we take the start at mid-2008 things are even uglier for the Consumer Confidence), we have:

• Consumer confidence rising along an upward trend;
• Retail Sales in Volume and Value falling along declining trend;
• Consumer confidence being more volatile than Volume and Value indicators for Retail Sales

This implies that Consumers are claiming that which they do not practice. Why? I have no idea. Patriotic duty to be optimistic? By Consumer Confidence recent readings, we should observe retail sales activity around late 2006-2007 levels. Ooops... Value of Retail Sales is now below where they were back at the start of the series in 2005. Volume of Retail Sales is now around late 2005.

The same applies to more smooth 3mo MA series:

There are no statistically or economically meaningful links between 3mo MA for Consumer Confidence and either Value or Volume of Retail Sales. Worse, year on year, the disconnect between the series has grown wider for both, with the widening being steeper for Value index. Again, this potentially indicates that margins in the retail sales have been wiped out and that this is not enough to get consumers spending again.

Which raises one serious question: local authorities are planning to jack up their rates in 2014. How will retail businesses afford these when they are trading in the above conditions?

As you know, I run my own index of Retail Sector Activity - RSAI - and updating this to September shows the flatlining of the trend for Retail Sector activity overall. All in, we are now in 75 months-long period of declining or flat retail sales:

You can turn the numbers upside down and compute them sideways. You can listen to the Government spokespersons telling us about improving consumer confidence until the Halloween pyres consume the last tractor tyre. You can believe that we are in a turnaround.

And I wish I could do so alongside you... but the above figures are not showing this. Perhaps we can add 'not yet' to that statement to keep some hope alive.

29/9/2013: Irish Retail Sales: August 2013

Retail Sales Index data was out last week and this is an update on series through August 2013.

From the top (excluding motor sales), 

• Retail sales activity by value declined from 97.4 in July to 96.0 in August 2013. Current 3mo MA is 96.1 which is still ahead of the 3mo MA through May 2013 at 95.2. Year on year August 2013 reading was down 0.21%. 6mo MA is a 95.7 which is lower than 6mo MA through February 2013 at 96.7. 
• Value reading in August 2013 stood at exactly the 12mo average for 2012 and 3.47% below annual average for 2005. Crisis period average is 100.6 which is significantly higher than the August reading and 3mo MA reading through August and 6mo MA arcading through August.
• Retail sales activity by volume remained largely unchanged (statistically) between July (100.9) and August (100.7). Current 3mo MA is 100.3 which is ahead of 99.1 3mo MA through May 2013. Year on year the index is up 1.31%. However, 6mo MA through August at 99.7 was lower than 6mo MA through february 2013 (100.4).
• Volume reading in August 2013 was 2.22% below crisis period average and 2.22% ahead of 2005 average.

The above figures illustrate the extent of deflation in the sector, where volume activity stayed more buoyant than value activity. Which means retailers have been burning through margins for a good part of five years now. There is severe doubt as to whether there are any profit margins left in the sector. 

Meanwhile, Consumer Confidence indicator is moving sideways, as ever detached from reality. ESRI's Consumer Confidence Index in August 2013 stood at 66.8, only slightly catching up to the downside with the overall retail trade stats, declining from 68.2 in July. CCI is now at blistering 68.5 3mo MA which is massively up on 60.0 3mo MA through May 2013. Year on year the CCI is down 4.6% signalling the index desperate attempt to claw back toward reflecting the trends in the sector.

However, as the chart below clearly shows, the Consumer Confidence Index continues to show no signs of coinciding with the broader retail sector trends.

To remind you, crisis-period correlations between CCI and retail sales are negative: -0.70 for correlation with Value of sales and -0.59 for correlation with Volume of sales. The CCI used to perform better in pre-crisis period, when strong trend in sales was evident. 

My own Retail Sales Activity Index (a composite of there measures weighted by relevance to employment and revenue generation) dipped slightly to 109.4 in August from 110.7 in July. The index is down 0.75% y/y. 3mo MA is at 110.0 in August and this is above 105.9 3mo MA through May 2013. RSAI has modest positive correlation with crisis-period data: value at 0.59 and volume at 0.63.

Overall: weak data for August, despite the fact that pre-school season was running at the time when weather did not impede shopping and given that overseas travel for summer breaks was low this year once again. September will be more important to watch to see how the sales and confidence are moving in advance of key shopping season in November-December.

30/8/2013: Retail Sales Dynamics: July 2013

Retails sales stats for July 2013 were released yesterday amidst a torrent of data releases for Ireland this week. With slight delay, here's my take on the core numbers. All referencing seasonally-adjusted data.

Core (ex-Motors) retail sales improved in value in July on seasonally-adjusted based, posting a rise of 2.32% m/m and 1.46% y/y.

• Current 3mo MA is at 95.9 - which means that value of sales is running at 4.1 percentage points below 2005 levels of activity. Previous 3mo MA was 95.5, which means the over the last 3 months there was virtually no growth in the value of retail sales compared to 3 months prior.
• Current 6mo MA is at 95.7 and this compares to higher 6mo MA for the previous period which stood at 96.8. In other words, last 6 months activity in retail sales, as measured by value, was lower than previous 6 months period.

Core (ex-Motors) retail sales improved in volume in July on seasonally-adjusted based, posting a rise of 1.31% m/m and the same y/y.

• Current 3mo MA is at 99.9 - which means that volume of sales is running at 0.1 percentage points below 2005 levels of activity. Previous 3mo MA was 99.2, which means the over the last 3 months there was some growth in the volume of retail sales compared to 3 months prior.
• Current 6mo MA is at 99.6 and this compares to higher 6mo MA reading for the previous period which stood at 100.5. In other words, last 6 months activity in retail sales, as measured by volume, was lower than previous 6 months period.

Meanwhile - a reminder - Consumer Confidence, measured by the ESRI has deteriorated m/m by 3.40% and there was a marginal rise of 0.74% y/y.

• Current 3mo MA is at 66.7 - which means that consumer confidence over the last 3 months period is running ahead of previous 3mo MA of 59.4. Broadly-speaking Consumer Confidence indicator moved in-line with core retail sales in value and volume over the 3mo periods.
• Current 6mo MA reading for Consumer Confidence is at 63.1 and this compares to lower 6mo MA reading for the previous period which stood at 59.8. In other words, Consumer Confidence continues to countermove vis-a-vis retail sales indices on 6mo average basis.

Couple of charts. First one illustrates three core indicators:

 
Chart above continues to show generally negative correlation between actual retail sales and Consumer Confidence indicator, as well as the general flat-line trend in the retail sales series for both indices over the last 20-21 months.

Next, relationship between Consumer Confidence and retail sales indices:

Lastly, my own Retail Sector Activity Index (RSAI) that take into the account dynamics and levels of all three indices: CSO's Retail Sales Indices (Value and Volume) and ESRI's Consumer Confidence index:

Per above, RSAI continues to run within the broad confines of the flat-trend average, with uptick in July being much flatter than in previous months.

Note: here are correlations between all four measures of retail sector activity health:

Summary conclusion: things are improving, but the sustainability of improvement is questionable, with 3mo averages divergent from 6mo averages. Consumer Confidence remains largely irrelevant to actual outcomes delivered by the sector. The base of activity remains low and we are now into 5 years-plus of effectively unchanging 'bouncing along the bottom' activity. 

31/7/2013: Retail Sales Dynamics: June 2013

Retail sales stats are out for June and anticipation (based on the booming Consumer Confidence index from ESRI) was for a significant uplift in sales. Alas, things turned out to be not what some expected. All data seasonally-adjusted.

• Value of core (ex-motors) sales fell 0.73% m/m in June and was up 1.28% y/y. 
• 3mo average through June 2013 stood at 95.1 down on 3mo average through March 2013 at 96.0.
• 6mo average through June was at 95.5, down on 96.8 6mo average through December 2012.
• Value of core sales in June 2013 was 5.75% below the average for the entire crisis period
• Volume of core (ex-motors) sales fell 0.50% m/m in June and was up 1.21% y/y.
• 3mo average through June 2013 stood at 99.2 down on 3mo average through March 2013 at 99.5, although the difference was minute.
• 6mo average through June was at 99.4, down on 100.4 6mo average through December 2012.
• Volume of core sales in June 2013 was 3.74% below the average for the entire crisis period.

Meanwhile, Consumer Confidence shot up 15.4% in June m/m and is up 13.3% y/y. 3mo average from consumer confidence is at 63.6 which is above 3mo average through March 2013 at 61.2. 6mo average is practically identical to 6mo average through December 2012.

Charts above show clear disconnect between retail sales (volume and value) and the reported consumer confidence index. The disconnect is bizarre. Firstly, neither current, nor lagged average consumer confidence has much to do with either volume or value of what consumers opt to purchase. Worse, since June 2008 through June 2013, Irish retail sales indices correlations with Consumer Confidence are -0.66 for value index and -0.60 for volume index. In other words, rising Consumer Confidence in Ireland tends to be associated with falling retail sales. It is worth noting that prior to the crisis - in January 2005 - December 2007 period, the above correlations were +0.72 and +0.74 respectively.

My own Retail Sector Activity Index has had a better fortune tracking overall activity in the retail sector:

 The above clearly shows the sustained 'flat at the bottom' period of retail sales overall activity (by weighted contributions of volume, value and forward confidence). The recent rise in the activity, driven so far solely by two factors: year-on-year dynamics still impacted by the losses made in May-June 2012  and by the bizarre rise in consumer confidence. It remains to be seen if the index can hold near a 14 months period high attained in June.

2/7/2013: Irish Retail Sales May 2013: A View from a Hurricane Shelter

Retail sales stats were relaxed few days back and I had no chance to update the series until now. So here's the headline analysis for May 2013.

Table below summarises the latest data:

The Retail Sales Activity Index is my own index based on volume and value of core retail sales and consumer confidence indicators, weighted to reflect both prices and volumes contributions to sector activity as measured by sector employment and contribution to the national accounts.

Charts below show dynamics:

You can see in the last chart above the flat (negative slope, but basically zero) trend that is prevailing in the series since January 2009. Same trends are basically present in ex-motors, automotive fuel and bars sales, although May 2013 data did come in at an upside, without breaking the overall trend. But the same is not true for the motor trades, which are heading South once again and along what appears to be a turning trend: