UK Retail Sales Worst Slump in 20 Years Surprises Market Commentators

By: Nadeem_Walayat

UK Retail Sales for June fell by a record 3.9% inline with the evidence of a rapidly slowing UK economy which is hitting the retail sector hard. Many mainstream market commentators have been taken by surprise by the released data as it follow hard on the heels of Mays surprise jump of 3.4% which was taken by many commentators at the time as the signs of a mini high street spending boom despite mounting evidence of a distressed retail sector which has witnessed literally crashing share prices on the back of earnings warnings as witnessed by Marks and Spencer's 20% crash at the start of this month.

The point being made is that month to month retail sales figures are not reliable and the media should learn not to run with such data by trying to determine why there is a mini-boom or bust literally on back to back monthly data. Whereas a much truer level of retail sales activity can be gleaned from a RPI trend adjusted quarterly averaged analysis of the retail sales data as illustrated below. Further the ONS data for the period January to May 2008 has been revised lower the effect of which is to reduce the current rate of decline of retail sales. I.e. May's retail sales index has been reduced from 144.7 to 144.4, with reductions of between 0.3 to 0.6 on the previous 5 months data.

The graphs clearly illustrate that Real Retail Sales on an inflation adjusted basis have been depressed for approaching 3 years which is reflected in the poor performance of retail stocks that have under performed the stock market as a whole with many having plunged by more than 50% year to date. Which is a far cry from the highest growth in retail sales since near records began for May 2008 data, the actual real retail sales index shows retailers are sinking into the red on the June data from beleaguered subdued state in May which was at historically depressed retail sales levels.

The current real index stands at .1% which is inline with the Market Oracle forecast for UK GDP growth of 1.3% for 2008 . In that the next 2 quarters will experience sharply lower economic activity that will feel like a recession as much of the growth for 2008 has now already occurred in the first two quarters of the year.

The most recent growth analysis based on first quarter released data suggests that the UK will achieve end 2009 GDP growth of between 0.5% and 0.8%, therefore the UK is expected to just miss a technical recession of two quarters of negative growth. However this is preliminary analysis ahead of more economic data, and is conditional on the wage price spiral not being ignited.

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

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Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 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

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