There’s an old expression, “there are three kinds of lies: lies, damned lies, and statistics.” Whether it was first said by Benjamin Disraeli, Mark Twain or one of the many other luminaries to whom it’s been attributed, it makes a good point.
Statistics can be used to bolster some outrageous lies (just look at the EU referendum).
But slightly less sinister, statistics can also confuse. It may not be deliberate but it happens. So it is with current retail sales data for the UK. More closely watched than ever for signs of a looming recession and consumer reaction to Brexit fears, the numbers can still leave the experts (and the rest of us) scratching our heads.
That’s why today’s retail sales reports from the British Retail Consortium (BRC) and Barclaycard have resulted in news headline ranging from upbeat to the exact opposite and don’t really add much clarity to what we’ve been getting in the past few weeks.
Last week BDO figures showed retail weakness following CBI and GfK numbers showing lower retail sales volumes and tumbling consumer confidence.
Yesterday Visa figures showed strength, but less strength than expected. And today? Well, the BRC’s monthly physical and online retail report and Barclaycard’s regular update both support the Visa view…. sort of.
Hold the front page
The BRC headline is that in the four weeks to July 30, UK spending bounced back. The sub-head is that the spending was driven by days and evenings out as the British summer suddenly arrived. There was more spending in pubs and a bargain bonanza as retailers had to extend their clearance sales to shift old-season stock, while tourists took advantage of the weak pound to stock up on watches and other baubles.
July retail spending rose 1.9% year-on-year the BRC said. It was the highest rise in six months and was good news after June’s anaemic 0.2% hike that analysts say was dented due to referendum uncertainty and depressing weather. On a like-for-like basis (ie stripping out new store space so it makes a more direct comparison with conditions of a year ago), the rise was 1.1%, again better than June’s 0.5% drop.
Clothing rose, and that weaker pound after 23 June meant Britain suddenly became a more attractive tourist destination in Britain. Given how important tourist spending is these days, that was good news and the watch and jewellery and watches sector got a much-needed shot in the arm.
More good news came as online continued its strength. In the three months to July, online sales of non-food products rose 11.1% and accounted for 20.4% of non-food sales, compared to 19.4% a year ago.
And Barclaycard added to all this saying its figures showed that consumer spending grew by 2.6% as spending in pubs, restaurants, cinemas and on days out surged in double-digits.
Now for something completely different
Now here’s the ‘but’ (yes, these days, ‘but’ is the one essential word when reporting on retail stats). But while the BRC’s basic monthly year-on-year spend rose, its measure of sales growth on a 12-month average basis was only 1.2% last month. That was the weakest since May 2009, which was when the UK was in the middle of a pretty tough recession.
Hmmm. And more bad news? The BRC also said that while online sales grew over the three months to July, store sales fell 1% in total and 1.3% on a like-for-like basis.
And while Barclaycard reported a rise, its 2.6% hike was lower than growth of 3.6% in May and June. It also polled 1,680 people to gauge consumer confidence. The result? Worryingly for the fashion sector, while 68% said they’d carry on spending as they had pre-Brexit vote, half said they didn’t feel confident about buying non-essentials. So, replacing last year’s parka and boots might not be high on their priority lists come September.
Ask the experts
So what do the assembled ranks of analysts, insiders and economists think of all this?
”This month’s solid sales figures may come as a shock to some, given the slew of early indicators suggesting that consumer activity was slowing in the wake of the referendum result,” Helen Dickinson, chief executive of the BRC said. “Little has materially changed for most UK households in the wake of June 23, so it is not surprising to us that sales are simply responding to their normal underlying drivers.
“A heavy month of promotions proved very successful in appealing to bargain-hungry shoppers. The big question for retailers is whether that success can be carried forward into full price sales.”
In fact, the BRC’s experts highlighted the promotional nature of retail last month saying retailers continued to cut prices at a time when clearance sales are normally over in order to maintain customer interest.
That makes it hard for them to grow their revenue, but especially hard to grow their profits as they’re selling more goods at lower margins.
And economists have echoed that warning saying that while retail spending makes up a huge part of the economy, it’s not always a great guide to future trends as it’s so very dependent on the weather, calendar shifts, special promotions and so on.
Based on business sentiment surveys, they expect business investment to slow down but consumer spending to stay fairly robust until the effect of price rises and possible unemployment fears kick in - which might not be until next year.
So while today’s news gives us a bit more to go on, it still leaves us slightly bamboozled as to how spending will pan out in future. It’s to be hoped that August stays summery but that we have a ‘true’ autumn. Wet, windy weather is a great spur to get fashion shoppers buying all the new-season knits, boots and outerwear. I’m keeping my fingers crossed.