Tag: retail sector

Weather has already been partly blamed for poor economic growth, in particular in December 2010 and January 2011. April 2012 is no different – the wettest April on record is said to have caused the worst performance in sales since March 2011.

Like-for-like sales fell by 3.3%, mainly through lower demand for clothes and shoes. Supermarkets saw an increased demand for warmer food items with the colder weather and demand for home products also increased, with analysts suggesting that people decided to re-decorate their houses rather than venture outside! This was further supported by sales of gardening equipment, which also fell. However, the weather is not always bad – in March, sales were higher than expected, with the unusually warm weather, but unfortunately for growth statistics, the boost in sales in March has been more than offset by the decline in sales in April. Furthermore, there are concerns that the March ‘heat-wave’ may have encouraged consumers to do their summer shopping already and hence summer sales may suffer.

The retail data for April 2012 must be considered carefully, as comparing this month’s sales with the same period last year will be very misleading. Last April, the UK was hit with the Royal Wedding, which did boost sales of many products – underlying sales growth was recorded at 5.2% for the month. However, whilst April sales for 2012 could hardly hope to compete with April sales for 2011, the downward trend is undoubtedly going to cause concern for the government. Helen Dickinson, Head of Retail at KPMG said:

“While May will certainly be brighter than April, the health of the retail sector continues on a downward trajectory.”

Whether or not sales do continue their downward trend depends on many factors, including government policy measures to boost growth and cut unemployment. However, one other variable that may influence the trend is the weather. Here’s hoping that the sun shines and people begin to spend!

Weaker retail sales, job surveys raise risk of longer slump Reuters, Olesya Dmitracova (9/5/12)
Wettest April ‘hits retail sales’ BBC News (9/5/12)
Retail sales slide in wettest April on record Telegraph (9/5/12)
April showers wash out retail sales Financial Times, Sarah O’Connor (9/5/12)
Retail sales slip back 1 per cent as fashion stores weather April showers Independent, James Thompson (9/5/12)

Questions

  1. Use a demand and supply diagram to illustrate the effects of the weather on equilibrium price and output.
  2. What other factors besides the weather affect retail sales?
  3. What government policy measures could be implemented to try to boost the retail sector?
  4. From the information you are told are there any sectors that surprise you in terms of whether sales have risen or fallen? Explain your answer in each case.
  5. With sales in April falling, what is the implication for a firm’s profits? What steps might a firm take in a bid to boost sales?

With all the doom and gloom of recent economic data, including rising inflation and higher unemployment, there’s finally a small speck of light and that’s in the form UK retail sales. The latest data from the ONS suggests that sales in the UK in September were higher than previously forecast and reversed the 0.4% decline we saw in August. A big contributing factor to this positive data was a boost to online sales, but this small glimmer of hope is unlikely to be sufficient to keep the economy going – unless sales keep rising, we are unlikely to see any significant increase in economic growth.

The data, while positive, is still unlikely to have any impact on economic policy. The minutes from the Monetary Policy Committee showed that there was unanimous support for further quantitative easing, as the threat of weak growth and financial instability and uncertainty remains. An economist from Barclays Capital said:

‘We don’t think the recent strong growth in monthly sales is likely to be sustained…The environment for retailers is likely to remain challenging as consumer spending remains depressed driven by low confidence and slow earnings growth.’

The data from September is positive, but it does little to offset the decline in sales seen in August. It was revised down from 0.2% to 0.4% – some blame the hot weather, which discouraged consumers from hitting the high streets in preparation for the winter. The key data to look out for will be sales figures for the next few months. Only then will we have more of an indication about exactly which direction the economy is moving in. The following articles consider this latest economic data.

Retail sales in UK unexpectedly increase at fastest pace in five months Bloomberg, Scott Hamilton (20/10/11)
UK retail sales see stronger-than-expected rise BBC News (20/10/11)
Nothing expected from today’s UK retail sales figure FX-MM, Richard Driver (20/10/11)
Retail sales: what the economists say Guardian (20/10/11)
£1 in every £10 now spent online, says ONS Telegraph, Harry Wallop (20/10/11)
Retail sales rise more than expected Financial Times, Sarah O’Connor (20/10/11)
Retail sales up but good weather has a price Sky News (20/10/11)

Questions

  1. Which factors have contributed to the higher than expected sales figures for September?
  2. Why do economists not believe that the higher growth in sales means signs of recovery for the UK economy?
  3. How has higher inflation impacted UK households?
  4. To what extent do you think the warm weather held back retail sales?
  5. What could explain why there has been a significant growth in online sales?