Thursday, November 29, 2012

Retail Sales rise again, but…

The release by the CSO of the October Retail Sales Index contained one predictable result: the sales of Electrical Goods rocketed (in advance of the shutdown of the analogue broadcast signal for television).
Electrical Goods Index to October 2012
This increase will distort the changes in broader measures of retail sales.  A core measure of retails sales excluding the motor trades rose in October.  The motor trades category has a weight of 18.2% in the October index so this represents 81.2% of the index.
Ex Motor Trades Index to October 2012
In October, the electrical goods category makes up 4.9% of this core measure of retail sales so comprise about one-twentieth of the total above.
One an annual basis core retail sales have been showing positive changes for three months but the jump in October to a 4% annual rise by value and 3.5% by volume was significantly boosted by electrical goods.
Annual Change Ex Motor Trade Index to October 2012
On a monthly basis core sales in October rose by around 1.3% in both value and volume terms. 
Monthly Change Ex Motor Trade Index to October 2012
The 25% rise in electrical goods means that this category alone would have contributed almost all of the monthly rise in October. [On a very crude basis the rise in electrical goods multiplied by its weight in the core index gives 0.25 x 0.05 = 0. 0125, or 1.25%.  All the series in the dataset are individually seasonally adjusted so such a comparison is not sound].
But assuming that the jump in electrical sales hadn’t happened and further assuming that the index had remained at its September level, then both the volume and value indices would be showing an annual rise of around 2.3% in October.  This is only a modest rise in comparison to the drops that preceded it, and since the positive rise in July retail sales have been relatively static since (excluding the electrical goods bounce in October with a more minor impact on September).
The arithmetic average the value and volume indices for the first ten months of 2012 is almost identical to the same measure from 2011.  Stabilisation? Yes. Improvement? Not yet.

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