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Labour Attempts to Ignite UK Consumer Mini Boom as ONS Revises Retail Sales Methodology

Economics / UK Economy May 25, 2009 - 03:21 PM GMT

By: Nadeem_Walayat

Economics

Best Financial Markets Analysis ArticleThe ONS finally came clean to confirm that the retail sales statistics are inaccurate and that it had revised the methodology in the way it calculates retail sales data, the data revision has ironically resulted in a better than expected boost to retail sales for a rise of 0.9% for April 09. The boost in retail sales data is inline with other observed trends in many areas of the economy which are feeding through towards a summer bounce in sectors of the economy such as for house prices in response to unprecedented actions of zero interest rates, 12% budget deficit spending and printing £150 billion out of thin air to buy government bonds and thus force down longer term interest rates.


I recognised the inaccuracy in the published retail sales data many years ago which prompted me to generate my own retail sales data which more accurately reflected the condition of the high street then the official data which typically resulted in highly volatile retail sales month to month data with an overall positive bias that fed through into mainstream headlines which were contrary to what was actually taking place on Britians high streets as the graphs below illustrate.

Retail Sales on Old Data (old data no longer available)

Retail Sales on New Revised ONS Method

Clearly the changed methodology on calculating retail sales by the ONS has greatly reduced the positive bias in the data observed since 2005, that did not represent the true state of the high state i.e. spikes higher that implied a mini boom was taking place when in fact retailers were going bust as I have written about several times over the past 2 years, UK Retail Sales Rise 1.2%, Real Retail Sales Fall 1.3%.

Real Retail Sales - Market Oracle Adjusted

The adjusted retail sales data has continued to accurately present the true state of the retail sector for several years and most notably for the period going into recession. Similarly the data has started to indicate a strong retail sector recovery as a consequence of real deflation as RPI hits an unprecedented -1.2% for April 09. This 'temporary' bounce may continue over the summer months and maybe into year end as the Labour government desperately battles to ignite a mini consumer boom into a general election that must be held within the next 12 months.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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