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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

UK Real Retail Sales Deflation Continues as Woolworths Goes Bust

Economics / UK Economy Dec 18, 2008 - 04:09 PM GMT

By: Nadeem_Walayat

Economics Best Financial Markets Analysis ArticleThe latest retail sales data released by the ONS shows UK retail sales showing a surprise rose of 0.4 for November and up 1.7% on a year earlier, however a deeper analysis of the data reveals that the data for October was revised lower on the retail sales indices from 140 down to 139.7, and therefore the index of 140.1 for November is just 0.1 higher on the original data rather than that which the mainstream press is running with as positive sign as the below graph illustrates.


The trend and inflation adjusted retail sales data continues to represent the real state of the UK retail sales market that continues to deflate at a rate of -1.2% on a year earlier. The below graph more accurately illustrates the actual experience of high street and shopping mall retailers than that which the officially revised higher data suggests, which has prompted headlines in the mainstream press such as -

Retail sales unexpectedly rise 1.5% in November - TimesOnline - Official figures this morning showed an unexpected rise of 1.5 per cent in retail sales in the UK last month. British retail sales rose 0.3 per cent in November and are up 1.5 per cent on last year, according to the Office for National Statistics (ONS).

Retail sales show unexpected rise - guardian.co.uk - Retail sales unexpectedly rose in November from the previous month thanks to the popularity of game consoles, but department store sales were at a record low and the overall annual growth rate was the weakest since early 2006.

Which is clearly an error to imply that an improvement has taken place on the high street which is clearly not the case given overwhelming evidence of retailers going bust.

Retail sector deflation continues to claim major retailers as its most public victim to date, Woolworth's illustrates, destined to disappear and taking with it some 30,000 jobs and potential consumers. Woolworth's is expected to cease trading across more than 800 stores by the 5th of January 2009. It could be said that over the next month or so that retail sales activity 'should' rise, but not due to the healthy nature of consumer demand but rather due to the closing down sales that induce a short-lived bounce in retail sales volume that is expected to slump soon afterwards due to the disappearing retail sales space. This coupled with the deflationary crash in inflation that has seen RPI plunge to 3% from 4.2% in 1 month suggests that there may be a brief pause in the deflationary retail trend during the January and February 2009 sales.

Consumers to be Hit by Inflationary Price Hikes During 2009

Sterling's crash of 2008 confirms that goods in the shops will not remain cheap for long and thus shoppers should take the opportunity to buy during the stock sales of the next two months or so as the price for filling shop stocks later during 2009 will be significantly higher, as already holiday makers venturing abroad are experiencing the consequences of the crash in sterling that continues to take the British Pound towards parity to the Euro.

On a related note the UK housing market forecast is due for an imminent update, subscribe to our always free newsletter to get the scheduled analysis in your inbox on the day of publication.

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

Copyright © 2005-08 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 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

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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