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:

26/4/2013: Another indicator turns South: Irish Retail Sales March 2014

Off the start, let me say I am sorry that I have to bring one set of bad news after another. Living, working, raising kids and building my family future in Ireland means that I have as much 'skin in the game' of seeing Irish economy recover from this crisis as any one of us.

With that in mind, here are the latest statistics from the CSO on Irish retail services activity in March 2013. These make for ugly reading.

First, quoting CSO own release:

"The volume of retail sales (i.e. excluding price effects) decreased by 1.9% in March 2013 when compared with February 2013 and there was a decrease of 3.6% in the annual figure.  If Motor Trades are excluded, the volume of retail sales decreased by 1.8% in March 2013 when compared with February 2013 and there was an annual decrease of 1.6%.

There was a decrease in the value of retail sales in March 2013 when compared with February 2013 of 1.9% and there was an annual decrease of 4.1% when compared with March 2012.  If Motor Trades are excluded, there was a monthly decrease of 1.8% in the value of retail sales and an annual decrease of 1.7%."

So, both volumes and values of sales, both core (ex-Motors) and overall have tanked in m/m and y/y terms. This is outright ugly.

Details of dynamics, all for ex-Motors sales:

• Value Index for core retail sales 3mo MA through March 2013 stood at 95.7 down from 3mo MA through December 2012 which read 97.1 (a 3mo back decline of 2.38%). 6mo MA stood at 96.4 against 6mo MA through August 2012 at 95.8. Which means deterioration set in over the last 3 months. Volumes of sales is now down 5.2% on 2005 average levels and 6.42% down on crisis period average activity levels.
• Volume Index for core retail sales 3mo MA through March 2013 stood at 99.0 down from 3mo MA through December 2012 which read 100.9 (a 3mo back decline of 3.07%). 6mo MA stood at 100.0 against 6mo MA through August 2012 at 99.4. Which means deterioration in value of sales also set in over the last 3 months. Values of sales are now down 2.2% on 2005 average levels and 5.35% down on crisis period average activity levels.
• Meanwhile, ESRI-reported Consumer Confidence Index rose to 60.0 in March 2013 against 59.4 in February, with 1.01% m/m rise and down only 0.99% on March 2012. 
• On 3mo MA basis - while both Volume and Value of core activities fell, Consumer Confidence index rose at a massive 20.5% rate. Bizarre stuff.
• Both Volume and Value of sales in March 2013 stood below 2005 average, while Consumer Confidence stood 18.5% above! Both measures of retails sales have dropped in march 2013 compared to crisis period average, but Consumer Confidence rose 8.3%. Even more bizarre stuff.
• My Retail Sales Activity Index fared much better than the ESRI Consumer Confidence Indicator - down m/m 1.22% and down 1.46% y/y, while up only slightly (+0.20%) on 2005 average and down 3.11% on crisis period average.

Charts:

Core Conclusions: Latest retail sales figures are outright ugly. These signal continued downside pressure on the domestic economy and, given the dynamics in personal income and earnings, this momentum appears to be driven by the overall consumer sentiment and lack of confidence in future income dynamics, related to Government policy (property tax and personal insolvency regime reforms) and to banks' interest rates policies (consumers expecting rises in the rates, confirmed by this week's ARM rate hikes by AIB & its subsidiaries). The economy is once again putting us on warning: turn downward in economic activity can be expected as a major risk.

30/3/2013: Retail Sales in February: Deadman Still Walking

With all the Cypriot Meltdown excitement as the newsflow, Irish data releases slipped into 'noise background' this week, so time to fix that.

March 28th we saw the release of the retail sales data for Ireland for February 2013. The headline from CSO read: "Retail Sales Volume increased 0.3% in February 2013" which obviously is the good news. Except, in reality, reading below headline we discover that:

"The volume of retail sales (i.e. excluding price effects) increased by 0.3% in February 2013 when compared with January 2013 while there was no change in the annual figure.  If Motor Trades are excluded, the volume of retail sales decreased by 0.2% in February 2013 when compared with January 2013 and there was an annual increase of 1.0%."

Wait a second, ex-motors, retail sales fell 0.2% in volume in m/m terms, but were still up 1.0% y/y. Oh, and durable goods (e.g. Electrical Goods) sales were down again.

And in value terms? The stuff that makes retail businesses actually hire or fire workers and pay or not pay taxes?.. Much the same:

"The volume of retail sales (i.e. excluding price effects) increased by 0.3% in February 2013 when compared with January 2013 while there was no change in the annual figure.  If Motor Trades are excluded, the volume of retail sales decreased by 0.2% in February 2013 when compared with January 2013 and there was an annual increase of 1.0%."

Let's see some dynamics:

• Value of sales ex-motors averaged 96.6 in 3mo through February 2013 against 97.0 in previous 3mo period. 6mo average through February 2013 was 96.8 (virtually identical to 3mo average), implying effectively zero growth over 6 months period, although previous 6mo period average was 95.5.
• Over longer horizons: 2006-2007 average of the index stands at 112.1, which was down to 2010-2011 average of 96.6 and 2012 full year average of 96.0, and January-February 2013 average of 96.5. You can tell the that whole volume 'activity' is just a flat trend since January 2011 with some volatility around it.
• Volume of activity slipped on 3mo average through February 2013 to 100.1 from 100.6 in 3 months through November 2012. The rate of decline on 3mo averages basis in volume was more pronounced than for value index, which is a story consistent with pretty much the entire crisis - retailers are only able to shift volumes at the expense of revenues they get. Consumers are getting better deals, but this also means employment in the sector is unlikely to increase.
• 2012 average of 99.6 is pretty much matched by january-February 2013 average of 99.7 - again, flat line growth trend. And as before that one runs from January 2011.

I keep tracking Consumer Confidence here, to show that the whole idea of 'confidence' when not underpinned by supportive fundamentals is not a reasonable concept for anchoring one's expectations about real economic performance.

Here, per usual, updated charts linking (or rather showing the lack of links) confidence to retail sales indices:

Lastly, recall that I run my own index of Retail Sector Activity (RSAI) that is a much stronger correlative for retail sector indices:

Two things jump out from the chart above:

1. The overall flat-line trend in activity in the retail sector over January 2009-present period, showing that, in principle, there is no recovery and there is no sustained signal of one coming so far in the short term future.
2. Forward-looking RSAI has slipped (on 3mo average basis) from 107.9 in 3 months through November 2012 to 106.0 in 3 months through February 2013. M/m RSAI is down 1.83% and y/y it is up 1.84%, tracking correctly the overall dynamics in the CSO indices.

Hence, my expectation is for more of the same in the next 3 months, with retail sales slipping slightly in volume and value, posting closer to zero growth in y/y terms over Q2 2013. The deadman is still walking, for now... and the 'turning point' is still some corridors away...

5/3/2013: Another Consumer Confidence Report Goes Off-Road

To the 'turning around' reports from the Eastern Front ca 1943... err... 2013... per KBC Ireland/ESRI Consumer Sentiment Index, consumer sentiment in Ireland fell in February to 59.4 compared to January reading of blistering 64.2. The report gets 'serious' on dynamics: "The three-month moving average also decreased from 59.3 to 57.8. The index fell below the average for the last 12 months (61.9)."

Let me add some more dynamics to this. First, let's look at January 2012 data (since we do not have Retail Sales Indices for February yet):

• Current 3mo average for Retail Sales Value Index is 96.8, down from 96.9 for 3mo average through October 2012, Volume is up from 100.3 to 100.5. Overall, indices are basically flat (+/-0.1% is not a significant change by anyone's standards, even for this Government);
• 3mo average of Consumer Confidence index through January 2013 was 59.3 down on 63.7 for the 3 months though October 2012.
• 6mo average, however, shows a slightly different story: Value of sales is up from 95.3 average reading for 6 months through June 2012 to 96.8 average for 6 months through December 2012; Volume is up from 98.8 to 100.4 over the same period, and Consumer Confidence is up from 105.8 to 107.7.

KBC/ESRI Consumer Sentiment Index is about as good of a gauge for retail sector activity here as the elephants' herd gate tempo is of use for timing the Swan Lake pas de deux. If you don't believe me, here's a chart:

In the nutshell, consumer confidence hit the bottom in July 2008 and since then things were, apparently improving. So much so that by June 2012 Value of Retail sales has hit the absolute record low, whilst Volume of sales did same in October 2011. There is a gentle uptrend in consumer confidence since mid-2008 against a downtrend in both Volume and Value of core retail sales.

Taken on 3mo average basis (to cut down on volatility), Confidence indicator has virtually nothing to do with Retail Sales, except for high sounding press release comments from the experts:

Per ESRI: "The promissory note deal was announced roughly half way through the survey period. The announcement of the deal would appear to have had some positive impact, with a preliminary analysis of responses showing an improvement in sentiment after the deal. We await the March results to see if the impact on sentiment is sustained.”

Indeed, we await... eagerly. 


In addition, Austin Hughes, KBC Bank Ireland, noted that [comments are mine] “A disappointing aspect of the sentiment data for February was that the decline was broadly based. Consumer spending power remains under pressure and there is little to suggest a dramatic improvement in Irish economic circumstances that would cause a ‘feel good’ factor to emerge anytime soon. [A revelation of most profound nature] 

"About the best that can be expected is a slow easing in the ‘fear factor’ that would encourage a gradual increase in spending. This may not be spectacular but it still represents significant progress. [What progress he might have in mind beats me, as Retail Sales figures continue to show little signs of reviving from already abysmally low levels]
 

"...The Irish consumer is seeing an improvement in ‘macro’ conditions across the economy but their personal finances remain under pressure. [In other words, we are in that ESRI & KBC-lauded 'exports-led recovery' boom, folks, where you and I get screwed, while MNCs get to report greater 'sales'] 

"It may be that some consumers had unrealistic expectations as to what a deal could achieve. [Did Government enthusiasm in over-selling the potential impact propelled enthusiasm of consumers for the 'deal'?] 

"More generally, it remains the case that consumers face significant further austerity in the next two Budgets. [Doh! We'd be discovering new Solar Systems, next] 

"The deal may ease the pain somewhat but it doesn’t entirely remove it. So, we shouldn’t expect a surge in confidence. That said, the fragile situation of Irish consumers means they are sensitised to bad news. So, failure to reach a deal could have seen sentiment deteriorate quite sharply.” [In other words, we were saved from an apocalyptic collapse of consumer confidence by the wisdom and the heroic efforts of the Government... and ATMs are still working!]

Irony has it, the same 'positive newsflow' that went along with the index slide this time around also supported (according to the authors) index surge in January - see here for January release comments: http://www.kbc.ie/media/CSI.Jan20131.pdf Who says you can't have a cake and eat it at the same time?

I don't know what to do - laugh or cry... cup of coffee is needed, however, as much as some serious improvements in survey to bring it closer to reality on the ground. It is needed because:

• While Consumer Confidence index through January 2013 (to take period consistent with data availability for both Retail Sales Indices and Consumer Confidence Index) was up 13.4% y/y, while actual retail sales rose just 0.94% in Value and 0.71% in Volume. 
• Compared to 2005 average, Retail Sales Value was down 3.42%, Volume was down 0.22% and Consumer Confidence was up 26.82%.
• Even with February 2013 moderation, Consumer Confidence is now up 17.33% on 2005 average.
• Worse than that, taking Crisis Period averages (January 2008-present), Value of Retail Sales is now running at 96.6 against the average of 101.17 (or 4.51% below average), Volume at 99.8 against the average of 103.49 (or 3.56% below average), whilst Consumer Confidence is running at 7.37% above the Crisis Period average of 55.32.

26/10/2012: Sectoral breakdown of Retail Sales

In the previous post I looked at the Retail Sales dynamics from the point of view of whether September and Q3 2012 data show any really exciting change in trend to warrant exceptionally upbeat headlines. There were, basically, none.

But what about all the 'sales increases' rumored and even discussed in the analysts' reports?

Let's take at annual growth rates for Q3 by broad categories of sales:

As chart above clearly shows, majority of the categories are under water when it comes to y/y comparatives for Q3 2012.

And the same applies for Volume of sales:

Now, let's take a look at each category individually:

• Books, Newspapers, Stationery & Other Goods: down 4.8% in Value and down 4.5% in Volume y/y in September, down 4.5% y/y in Q3 2012 in Value and down 4.3% y/y in Q3 2012 in Volume. No good news here.
• Hardware, Paints and Glass: down 3.8% y/y in Value and down 4.3% y/y in Volume in September 2012, also down 4.8% in Value and 5.3% in Volume for Q3 2012 compared to Q3 2011. No good news here.
• Other Retail Sales: down 3.3% in Value and down 3.1% in Volume, same down 4.2% in Q3 2012 y/y in Value and down 3.8% in Volume. No good news here.
• Furniture & Lighting: down 2.3% in Value and up 2% in Volume in September in y/y terms, which means that the sector is trading down on revenues amidst a deflation. In Q3 terms relative to Q3 2011: the sector is down 3% in Value and up 0.8% in Volume - again, deflation and falling revenues. I wouldn't call this a good news.
• Clothing, Footware and Textiles: down 1.7% in Value and down 0.6% in Volume in September, down 2.3% in Value and 1.4% in Volume in Q3 2012. No good news anywhere here.
• Food, beverages & Tobacco: down 0.3% in Value in September and down 0.9% in Volume. In Q3 terms the sector is down 0.9% and 1.5% in Value and Volume respectively. All signs are, therefore, flashing red. Alongside the trends in Food and Beverages (below), the above suggest significant contraction in legal sales of tobacco, possibly due to increased tax evasion and smuggling.
• Household Equipment: up 0.8% in Value and 5.6% in Volume, which means that deflation is erasing some 86% of the revenues out of the increased activity. In Q3 2011-Q3 2012 terms, the sector is up 0.1% in Value and up 5% in Volume. In effect, revenues standing still, while volumes of activity rising. Last time I checked, the revenues pay for staff, while volume sales pay for warehouses.
• Pharmaceuticals, Medical & Cosmetic Articles: the less elastic in demand category of goods saw September sales rise 1.2% in Value and 2.7% in Volume, while Q3 sales saw increases of 1.2% in Value and 2.3% in Volume. This is a sector that did well out the recent data both in terms of value and volume of sales rising. All of these sales are, however imports.
• Motors and Fuel sales rose 2.9% in Value and fell 0.5% in Volume in September. Q3 change y/y was -1.1% in Value and -4.1% in Volume. Here's an interesting thing: Fuel sales - the coincident indicator for economic activity - were up 3.5% in Value and down 5% in Volume in Q3 y/y, which means that once we strip the inflation (which goes to fund Irish Government and foreign producers at the expense of the real economy here), the sales are down and this does not bode well for Q3 economic activity.
• Food business: is booming, rising 3.8% in value and 2.4% in Volume (suggesting inflation in food sector) in September, rising 3.1% in Value and 1.9% in Volume (confirming inflation) in Q3 2012 y/y. Now, food sales, especially in rainy July-August, could be strongly influenced by people staying at home. The same is true for the expected effects of reduced travel during summer months as fewer of us can afford trips out of Ireland and those who still can taking shorter breaks.
• Bars had a cracking September on foot of a number of higher profile events - rising 3.9% in Value and 2.3% in Volume. However, Q3 figure confirms what is suggested by the food sector performance (above): sales are down 1.9% in Q3 y/y in Value and down 3.4% in Volume. In other words, controlling for one-offs, there is no good news in the sector.
• Lastly, Electrical Goods. Given the switch to digital TV this month, it can be expected that sales were up 5.5% in Value and 11.2% in Volume in September, while Q3 figures were up 6.7% in Value and 12.7% in Volume. Interestingly, these sales rose 4.9% y/y in Value in Q2 2012 and 11.3% in Volume. But in Q1 the same sales were down 5.3% y/y in Value and up only 1.6% y/y in Volume. Overall, during the Great Recession the sector did better than any other sector: in Q3 2012 the index for the Value of Sales in the sector stood at 76.3 (100=2005), which is the fourth highest in the overall sectors categories. For the Volume of sales, index stood at 141.1 - the best performance by far of all sectors. 

So the key summary: Non-food retail sales excluding motor trades, fuel and bars: down 0.6% in Value and up 1.5% in Volume in September - aka deflation and falling revenues. In Q3 2012 compared to Q3 2011: down 0.7% in Value and up 1% in Volume - again, deflation and shrinking revenues. Care to suggest this is 'good'? It is better than outright y/y drop of 3.3% in Q2 2012 in Value and a decline of 1.6% in Volume, and better than -5.6% in Value and -4.3% in Volume recorded in Q1 2012, but it is comparable in Value terms to Q4 2011 (down 0.6% y/y), although still better in Volume terms (-0.7% y/y). 

Still, getting worse at a slower rate is not equivalent to getting better. And it is most certainly not a 'solid retail sales in Q3' result that is being claimed by some analysts.

26/10/2012: Retail Sales in September

In the last few days we have been treated to a barrage of the 'sell-side research notes' extolling the virtues of Ireland's economic 'comeback'. Property markets are now, allegedly, on the mend (never mind, the 'mending' bit is just about sizable enough to matter statistically and economically returns property valuations to... err... April 2012 levels). Unmeasurable 'investor confidence' is back at play - never mind that 'investors' are really a handful of buyers of the Irish Government bonds, usually with maturity range well within the cover by the Troika / ESM. Latest twist - cheerful analysis of the Retail Sales data. One note I received on today's Retail Sales figures for September 2012 was issued minutes after CSO published the data, suggesting that the author had absolutely no referencing to actual data published, but simply plucked headlines and strung them up into an analysis.

Having done some more sober analysis of the house prices data (see here), let's take a look at the Retail Sales data.

Value Index:

Core retail sales (ex-motors) value index rose (preliminary estimate - so subject to future revisions) in September to 96.5 from 96 in August. The index is now 2.88% ahead of where it was three months ago in June 2012. Month on month the index is up 0.52%, or statistically indifferent from zero increase. Current level of activity is comparable to May 2012 hen the index stood at 96.4. Year on year index is up 2.22%.

More dynamics in Value Index:

• Q3 2012 average index reading was 96.0 against the previous quarter average of 95.1 (+0.91%).
• In September, rate of growth in retails sales value actually declined: in June m/m rate of growth was -2.7% due to poor weather, this was reversed partially in July with a m/m rise of 1.8%. Since July, growth rate fell to 0.6% m/m in August and to 0.5% in September. This is hardly the 'good news'. 
• Y/y growth rate in September (+2.2%) was robust, but it is driven more by a contraction in sales in August and September 2011 than by an expansion of sales in September this year.
• Overall, core driver for July performance that determined Q3 results is the rapid fall off in Value of sales in June, not a robust growth in August and September.
• 6mo average through September is now at 95.6 which is only 0.7% ahead of 6mo average through March 2012. September reading is below 2010-2011 average by 0.13% and is down on crisis period average by 4.9%.

Volume Index:

Core retail sales Volume Index rose from 99.2 in August to 99.8 in September, up 0.6% m/m and 1.42% y/y. The index is now 1.84% ahead of where it was at the end of Q2 2012.

Dynamics in  Volume Index:

• Q3 2012 average index was 99.4 up on 98.6 for Q2 (+0.81%), so volume performance here is even less impressive than already underwhelming performance for Value index.
• 6mo average through September is 99.0 against 99.3 in 6 months through March, meaning that on half-yearly basis we are still under water.
• In 2010-2011 the Volume index averaged 101.24 against Q3 2012 average of 99.4. Make your own conclusions here. During the whole crisis, the index averaged 103.66, which means that September index is 3.73% below the crisis period average.

Now charts:

Now, onto my own index: the Retail Sector Activity Index:

Driven by a combination of weak increases in actual volume and value indices and a substantial drop off in consumer confidence (which fell from 70.0 in August to 60.2 in September), the RSA Index has fallen from 110.11 in August to 106.8 in September. During the current crisis, my RSA Index lagged 1 month actually has much stronger correlation (and positive) with retail sales volume and value (ca 83-84%) than consumer confidence (which has a negative and weak correlation with both value and volume indices - ca -30-34%). Hence it acts as a better predictor of the forthcoming activity. The RSAI is now down m/m, but is up y/y and Q3 average is up on Q2 average. 

This means that I can't call the new trend confirmation on the basis of positive monthly rises in Q3 2012 nor can I call the return of the downward trend. Put differently, real data suggests that things are bouncing along flat trend so far. Unlike the claims by some Irish 'analysts' who see "solid retail sales" data.

30/9/2012: Retail Sales data for Ireland August 2012

Retail sales figures for August are out this week with some positive, if only fragile, news.

• Core retail sales Value Index rose to 96.0 from 95.3 in July, up 0.73% m/m. Value index is still down 0.31% on 3mo ago, but the index is up 1.48% y/y.
• 6mo MA is at 95.42, so August reading is slightly ahead of the longer-term average. Previous 6mo MA through February 2012 was at 95.3.
• August reading is still below the 2010-2011 average (96.63).
• August marked second consecutive rise in Value index, although the overall index still did not fully recover from June sharp drop.
• Core retail sales Volume index remained relatively unchanged in August at 99.2 after posting 99.1 reading in July. The index is up on 98.0 in July, but is still below May reading of 99.5.
• Volume index in August was at -0.30% below the reading 3 mo ago and is up 0.3% y/y. The gap between volume and value indices changes over the last 12 months suggests acceleration in inflation.

Charts below show overall trends, including the trends in consumer confidence:

As usual, my own Retail  Sector Activity Index (RSAI) based on the above series:

RSAI rose to 110.1 in August from 108.9 in July due to a combination of increases in the Value and Volume Indices and Consumer Confidence. RSAI is now 1.15% up m/m and 6% up y/y with core y/y driver being consumer confidence (+25.4% y/y in August). The problem is that on general, the Consumer Confidence indicator is largely irrelevant as a metric to the sector performance. For example, all indices set at 100=2005 level of activity. By this metric, Volume of activity is still down 0.82%, while the Value index is down 4.0% on 2005 levels of activity. Consumer Confidence is 38.3% up. 

So the positives are, at least through August, as follows:

1. Value Index of retail sector activity is up 2 months in a row, but at a weak rate of increases so far;
2. Volume index is basically flat (at least not declining)
3. Confidence is up, but I would advise serious caution in interpreting this.
4. RSAI is up and may be signaling some future firming up in sales, assuming confidence indicator is not going completely out of connection with the real economy.