June 26, 2008 | posted by Michael Baxter in High Steet | comments (0) |

per cent

There is no doubt about it, there is something strange in the neighbourhood.

The ONS had retail sales in May rising at their fastest year on year rate since 1986, yet all around there is gloom.   So how do you square ONS data with anecdotal evidence.   Who is right?  Who are you going to call?

Answer:  the CBI.

The CBI has just released its distributive trades survey for June.  Thirty nine  of retail respondents to its survey reported that in the first half of June sales were lower than a year ago, while 30 per cent said sales had increased.

The resulting balance is minus 9 per cent. 

Now it had been worse than that.  It was worse last month, and the month before, but that aside you have to go back to March 2006 for the last time the index was so bad.    More to the point, the CBI index has been negative for three months in a row now.

That said, 2005 was minus scores for most of the year, so really the key will be what happens over the next few months.

The ONS finding for May was perhaps something of a freak, but what is clear is that right now the High Street is bad, but apparently not that bad.  Although it does appear the big supermarkets are clearing up, at the moment.

Andy Clarke, the new chairman of the CBI’s Distributive Trades Panel, and Retail Director of Asda, said:

“High fuel prices and concerns about the economy have blunted consumer appetites, and those retailers linked to the housing market are continuing to endure difficult conditions.

“Grocers have had another strong month, and we are seeing people spend more in supermarkets as they focus on the essentials and also upgrade to higher value food ranges instead of having a night out.”

June 20, 2008 | posted by Michael Baxter in High Steet | comments (0) |

Retail sales in May saw their biggest monthly rise since 1986.   

Let’s run that past you again.  House prices are in free fall, banks are announcing write-downs and rights issues with gay abandon, oil is shooting up, inflation is up; but our wages are not keeping pace, Mervyn King talks about real income falling, a credit crunch is supposedly strangling the life out of the economy, more and more economists are warning recession could be around the corner, and the High Street had its best month-on-month rise in 22 years.

The last time sales jumped that fast, Bobby Robson was manager of England, Jason Donovan and Kylie Minogue got married in Neighbours, and Tom Cruise was messing about with Migs in the film Top Gun.

How can this be?

“Sales by small and medium businesses show continued strength,” said the Office for National Statistics.   “In March to May the value of sales for all retailing was 4.2 per cent higher than in the same period a year earlier; sales by predominantly food stores were 5.4 per cent higher; sales by predominantly non-food stores were 2.8 per cent higher and sales by the non-store retailing and repair sector were 7.4 per cent higher than a year earlier.”

The rise in sales was put down to the good weather in May.  Good weather in May! Have you been outside much lately?  Sure, May had a week or so of good weather, but it wasn’t that exceptional..  It wasn’t the warmest May since 1986.  And it has rained a fair bit too.

The figures are at complete odds with findings from the CBI.   Its Distributive Trade index showed a reading of minus 14 for May.  Last month was worse than that, but April aside this was the worst reading since February 2006.

Then again, the British Retail Consortium was slightly more in line with the ONS data.  It recorded a 1.9 per cent rise in like-for-like sales on last month and a 4.6 per cent rise on a year ago.

The Telegraph chose to focus this morning on how unbelievable these figures are.  It quoted Philip Green as saying the data was bizarre.  He said: “These figures in no way reflect the current trend. They are totally misleading. I have no idea where they collect this information from. I’d love to know. Can I join the club that is seven points up in May?” 

The Telegraph also had a word with Sainsbury’s Justin King, who was equally perplexed: “The ONS doesn’t appear to understand how people shop…These figures are based on a small basket and exclude promotional activity.”

Even Charles Bean, the man being promoted to the post of deputy governor at the Bank of England, seemed puzzled, although he couched his words in econ speak. “The retail sales numbers do look somewhat stronger than really a raft of surveys,” he told the BBC.

Capital Economics said: “Given the backdrop of sharply rising inflation and plummeting confidence, we continue to think that the official sales figures should be taken with a pinch of salt. Indeed, the CBI retail sales survey and the official figures have recently diverged sharply.”

In complete contradiction to the reports saying the figures were unbelievable, others worried that they signified inflationary fears must be stronger than ever.  Ian Kernohan, economist at Royal London Asset Management told the BBC:  “Unfortunately this ’shop till we drop’ attitude will sow the seeds of its own demise. The risk of rate rises followed by a recession has just gone up.”

And the BRC’s Director General Stephen Robertson, perhaps with half an eye on the Bank of England and worried the data would prompt a rise in interest rates – the last thing BRC members want, said: “These official figures confirm our own findings that retail sales growth was lifted by the final arrival of warm weather in early May. As the sun came out so did shoppers, boosting sales of summer food and drink and particularly clothing which had been struggling.

“However, the economic fundamentals remain weak. Much of this sales growth is the result of discounts and promotions and people are still reluctant to buy more expensive items, such as furniture and electricals.

“Personal finances are under severe and mounting pressure. Customers are concerned about jobs and the housing market. So it remains to be seen whether this sun-driven boost is sustained over the coming months.”

The Bank of England, itself, seems more interested in surveys. And puts more credence on what the BRC and CBI are finding than the official data.

But how can the ONS have reported such sharp rises?

One possibility is that the data is wrong.     Maybe it doesn’t place enough emphasis on the so called BOGOF deals – buy one get one free.

Others say sales and specials have encouraged shoppers to spend more.   In other words, bargains were behind the May surge.  If that is so, then explain these recent comments from the CBI: “The prices of goods in the year to May increased at their fastest rate in 16 years, as many retailers passed on the growing pressures of rising energy, food and raw material costs.”

Another possibility is that all the doom and gloom doing the rounds is wrong.  The Bank of England is dead right, falling house prices don’t mean falling sales on the High Street. If that is right, then inflation really is a danger, and the Bank of E will need to up interest rates fast.

Here is another theory. Data from the Council of Mortgage Lenders, out yesterday, revealed that gross mortgage lending fell slightly from April.  This is a surprise too, but is largely explained by the market for re-mortgaging still apparently in buoyant shape.    A CML statement said: “The re-mortgage market remains on track to meet our forecast for growth this year, demonstrating the resilience of the market despite recent bad news. However, by comparison, the next few months will remain very weak for house purchase activity for the funding reasons which are now well rehearsed.”

In other words, if you want a loan to buy a house, that is tricky.  But if you want to re-mortgage, that is not so bad.

Maybe consumers have been topping up their mortgages, and spending some of the money.  If so, May saw no more than a kind of last hurrah, because, as house prices fall, this option will no longer exist.
 

May 23, 2008 | posted by Michael Baxter in High Steet | comments (1) |

It’s a little odd, isn’t it?

Of the three major indices for tracking retail sales, you have got two saying things are pretty dire, and one saying well, actually they are not too bad at all.

The thing is though, the index which boasts the most favourable findings is the official data, so that’s all right then.   When in doubt, trust the Office for National Statistics – and what a relief.  In the three months to April, retail sales were 1.5 per cent up on the previous three-month period.    Okay, sales were down in April, but only by a tiny 0.2 per cent; besides, the bad weather probably explained that, anyway.

Relax, the crisis is not spreading to the High Street.

It is just that this is not what the retailers are saying.  Recently, the most successful British retail entrepreneur of the lot, Philip Green, said conditions were the toughest he had ever experienced.    Okay, M&S posted a healthy £1bn profit recently, but even for them the prognosis is not so good.

Unless your name is Tesco, or one of the other big three supermarkets, and possibly, unless your name is John Lewis, it appears retail is not a good place to be right now.

Yet, the ONS has the High Street staying steady.

The ONS reports that in April, household goods retailers saw sales jump 4 per cent.   Surely that can’t be right – when the property market is in such a mess you would expect household goods retailers to be suffering too.   Recently, ScS, one of those furniture retailers with those large out-of-town showrooms, had sales falling 11 per cent in April.

Even the Bank of England seems puzzled.  The latest minutes from the MPC committee said: “According to the ONS, retail sales volumes had fallen by 0.4 per cent on the month in March, but that still left volumes 2.0 per cent higher for the quarter as a whole. Survey data from the British Retail Consortium and the CBI reported much weaker growth in sales. Reconciling these rather different pictures remained difficult.”

But then the Old Lady’s rate setting committee seemed to go all bearish: “But surveys were giving a uniform signal and were consistent with reports from the Bank’s regional Agents and consumer confidence measures,” said the Minutes.   “So it seemed sensible to place more weight than normal on these indicators relative to the official data in assessing the current state of consumer demand.”

So, in other words, the ONS might have things looking rosy, but no one seems to believe them.

The same applies to ONS data on inflation.  Recently, Justin King, head honcho at Sainsbury’s, lambasted our official compiler of statistics for over-stating food inflation.

“They’re over-reading because they do not pick up the pricing activity of grocers fighting hard for market share and sales growth, they don’t pick up promotional activity – the market is much more promotional and has been now for six to nine months… and I don’t think they pick up things like vouchering activity,” King said. “Real inflation and therefore the real challenge in household budgets is perhaps less than is being reported.”

So does it matter?

The answer is yes, but if you listen, then it doesn’t matter so much.

Official data always seems to lag behind reality.    This is a problem because government policy is often based on official data.    This is not new.  The boom–bust cycles of the past were in part made worse because governments were behind the curve.   In reacting to data that was out of date, they pumped gas into the economy when they needed to be slowing things down, and slowed the economy when it needed gas.

Of course, the economic victory of the last few years was supposed to have been that our Gordon had licked boom and bust.

The reality, though, is far from that.  But before policy makers can lick the economy back into shape, they first need to find statistics they can believe in.   Maybe the key is to listen to what people are saying – and to take heed of anecdotal evidence.

April 25, 2008 | posted by Michael Baxter in High Steet | comments (0) |

What a miserable lot economists are.   They wait for good news, and when it finally comes along, they turn their noses up and say, ”the statistics are probably wrong, anyway.”

Yesterday, the Office for National Statistics, which by the way is now independent, and has launched a new web site but which is totally un-navigable, released its latest data for retail sales.

And it was good news.

March saw retail sales down 0.4 per cent, but for the three months from January to March retail sales leapt a remarkable 2.6 per cent.   The ONS talked about the retail sector enjoying robust growth.

But it just doesn’t make sense.   Retail’s captains, the likes of Philip Green, have been moaning about how tough things are – the toughest they can remember, some say.    Others, the likes of the British Retail Consortium and CBI, have been reporting bad news with tedious regularity. 

Maybe the UK’s High Street is full of Moaning Minnies – or maybe the problem is something else.

Today, The Times headlined: “High Street’s boom figures under question,” while Capital Economics said, “We continue to have our doubts about how accurate a picture of High Street demand the official figures are giving.”

Perhaps we are actually seeing the difference between the big supermarkets and the rest shown up in starker relief. 

While the likes of Tesco recently revealed that profits were up 11.8 per cent, sales were up 11 per cent, and like-for-like sales were up 3.5 per cent in the year to February, other retailers seem to be suffering.   For example, in the 13 weeks to December 29, like-for-like sales at Marks and Spencer fell 2.2 per cent.

ONS data, it appears, is more heavily influenced by the big supermarkets. 

Mind you, sales might apparently be keeping up, but prices are falling.  The ONS  retail sales deflator fell from -0.6 per cent to -1.2 per cent in March. 

February 12, 2008 | posted by Michael Baxter in High Steet | comments (1) |

And while our economic hope falls under a shadow, good news pipes up over the din of dismay. Yesterday, the British Retail Consortium revealed its latest set of results for the High Street – and sales shot up in January.

Retail sales were up 2.6 per cent on a like-for-like basis in January on the same month in 2007, or so says the British Retail Consortium (BRC) This was a sharp improvement on December, when sales growth was just 0.3 per cent. The three-month trend rate of growth rose to 1.5 per cent, from 0.8 per cent in December for like-for-like sales, and to 3.7 per cent from 2.8 per cent for total sales, reflecting the continuing growth of retail space.

Apparently it was a good month for food sales.

It wasn’t all good, though, because clothing sales were down on a year ago for the fourth month in a row, and this was despite aggressive discounting. Homewares and furniture showed a modest improvement but “remained difficult,” or so said BRC and it added, “while health and beauty picked up but did not regain last summer’s strength.”

There’s no prizes for guessing what the BRC wants to see. It wants to see cuts in the rate of interest. Stephen Robertson, Director General, British Retail Consortium was interviewed on the Today programme this morning, and he continued to bang the “cut interest rates drum”.

The BRC differs from other industry pressure groups in that it likes to tell bad news. Paint an unpleasant gloss, or make the High Street sound like a place of torture for its business, and then maybe the Bank of England will lower rates. And so it was yesterday.

Helen Dickinson, Head of Retail, KPMG, who co-produced the data with BRC, said, “While the ‘doom-mongers’ may be temporarily silenced by this month’s results, it’s certainly too early to draw any conclusions about how the rest of the year will pan out. The growth of 4.9 per cent in total and 2.6 per cent in like-for-like sales was heavily skewed by a strong performance in week one, as January sales absorbed demand carried over from a poor December, which then deteriorated as the month progressed. Another strong performance from food shows retailers are reluctantly passing on some price inflation to the consumer, whereas clothing, particularly women’s, continues to underperform.”

January 30, 2008 | posted by Michael Baxter in High Steet | comments (0) |

Well, there was good news amongst the bad from the CBI yesterday.

In the latest instalment in its distributive trades survey, the CBI said the balance between retailers saying sales were up, minus those saying they were down, during the first two weeks of January, was the lowest since November 2006. In fact, 39 per cent of respondents said year-on-year sales volumes rose in the first half of January, while 34 per cent said they were down; that makes, after allowing for rounding, a balance of plus 4.

But, here is the good news, retailers do see conditions improving next month, with a balance of 10 per cent expecting sales to grow, although this would still be somewhat slower growth than the average for the second half of 2007.

John Longworth, chairman of the CBI’s Distributive Trades Panel, said: “The January sales were a little flat this year, and were weaker than the lacklustre lead-up to Christmas.

“While sales of groceries and household essentials went quite well, shoppers are watching their wallets, and that can be seen in the big drop in sales of big-ticket items like TVs and washing machines.

“However, this survey and recent CBI manufacturing data show that, while market turbulence is undoubtedly affecting consumer confidence, the economy as a whole is nonetheless bearing up and is continuing to grow, if more slowly.

“Overall retail sales were still better than expected this month, and the High Street does predict a slight improvement in February.”

January 10, 2008 | posted by Michael Baxter in High Steet | comments (0) |

The Orient Express pulled into Venice - Twiggy sips something that looks a lot like a bellini, with a backdrop of St Marks Square; Laura Bailey, Erin O’Connor, Noemie Lenoir and Myleene Klass all look resplendent in their MS attire - nothing seems to symbolise the renaissance of Marks and Spencer more than these ads - it’s been little less than a miracle, as the former queen of the High Street, down on her luck, close to being purchased by Philip Green, performed a comeback to make John McCain envious. At over 100 years old the retailer is no kid, but over the last few years it was certainly able to show the retail world “what a real comeback looks like.”

But then this Christmas it all came to a grinding halt.

Then again, as its boss, and in-house miracle worker, Stuart Rose said “Life is all about up and down. There is no crisis here. All it is, is the largest clothing retailer saying: ‘Yes, the UK customer is being more circumspect about what they are spending’.”

Like-for-like sales at the retailer fell 2.2 per cent in the 13 weeks to December 29, and shares took a drubbing, falling by almost 20 per cent.

Some people say that all that can be known is allowed for in share prices; shares only change on surprises that could not have been predicted. Therefore, goes the argument, there is no point in investing in shares - since the markets have already discounted anything a member of the public could have taken into account.

If that is so, why is it then that yesterday shares fell across the retail sector - and according to The Times, the FTSE 350 general retailers index suffered its biggest one-day fall since 1987.

It seems yesterday markets woke to a reality that had been staring them in the face. It appears that actually the market is only good at pricing stocks, in the way an ostrich is good at avoiding danger by burying its head.

In fact, what we learned yesterday from the latest chapter in the MS story, really is little more than that common sense is about right.

Sir Stuart said, “If you look at our volume sales, we have had the biggest Christmas for six years.” The snag is, of course, that while sales volume was good, revenue, thanks to price discounting, was not so good.

“The UK economy has got a bit of a cold,” said the MS kingpin.

Yet, maybe a more-interesting thought lies in another comment made by Sir Stuart Rose. “I’ve never seen such a polarised economy. The rich are getting richer, the West End in London is still strong, but go outside and it’s completely different.”

In referring to this growing spread across the UK, he may really have made a far more profound comment.

Retailer’s malaise is a problem for today, and a problem that will ease - eventually.

The growing gap between the rich and poor will not go away so quickly. This growing gap also disguises the true changes in the economy. The UK might be growing, but for the median household, it is far from clear that disposable income, especially after taking into account the rising cost of fuel, food, and council tax, leaves them any better off at all.