IDEX Online Research: U.K. Retail Sales Strong

Retail sales in the United Kingdom in May show that the spring upturn was sustained, with significant contributions coming from department and clothing stores. These results validated the optimistic advance results posted by the British Retail Consortium as well as the distributive trades survey done by the Confederation of British Industry.

For the month of May, total retail sales were up about 3 percent on a seasonally unadjusted basis. IDEX Online Research uses seasonally unadjusted sales because they approximate “dollars through the cash register” for merchants for comparative purposes.

While the U.K. Statistics Offices does not post jewelry sales, a category called “textiles, clothing, and footwear” is a reasonable proxy. This category showed a dramatic 5.6 percent gain in May versus the same period last year.

The graph below summarizes sales trends for both “all retail” as well as “textiles, clothing, and footwear.”  

Source: UK Statistics

U.K. Retail Strength Broad-Based

The U.K.’s retail sales gain in May was fairly broad-based, though food sales were about flat and household goods were up a modest 0.4 percent. However, the household gain is good news, since it had been flat for most of 2005.

It is important to note that the strongest gains came in the clothing and electrical goods (mostly consumer electronics) categories, both of which were likely distorted by consumer buying in the period just prior to the World Cup.

Outlook: Positive, but Guarded

In June and July, food and beverage sales will likely be affected by various sports events. While the sales increase for retailers is good news, it does not mean that household fundamentals are solidly positive yet. We continue to expect a moderate recovery in underlying consumer demand. The good news is this: IDEX Online Research believes that the U.K. consumers will continue to increase spending, but the pace could be erratic and unpredictable.