The Retail Note | Retail sales: flatter than a pancake?
This week’s Retail Note analyses the official retail sales figures for March from the ONS, which were largely unexciting and borderline lackluster.
5 minutes to read
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Key Messages
- ‘Flat’ the operative word in the ONS release
- March m-o-m retail sales values +0.0% (vs Feb +0.0%)
- March m-o-m retail sales volumes +0.0% (vs Feb +0.0%)
- Limited evidence of an Easter demand spike
- But y-o-y retail sales values +3.4%...
- …and y-o-y retail sales volumes grow by a v encouraging +0.4%
- Implied shop price inflation reduces to 3.0%
- Good month for charity shops, textiles, cosmetics, DIY, garden centres
- Bad month for chemists, furniture, footwear, electricals
- Online y-o-y value growth of +1.7% (+0.1% m-o-m)
- Online penetration increases by +10bps to 25.9%
- Consumer demand erratic rather than flat
- An improving trend, but no ‘straight line’ recovery.
Not much to see here. That is the apparent takeaway from the ONS retail sales release this morning, both in terms of tone and detail. The new revamped version includes just three pages of largely anodyne commentary amidst 90+ pages of data. And that commentary is devoted almost exclusively to largely meaningless month-on-month comparisons to placate the economist community.
The (supposed) headlines…
Flat. As a pancake. That’s been sat on by an elephant.
That’s essentially the m-o-m trend for the second month in a row. Retail sales values in March grew by +0.0%, following growth of +0.0% in February. Retail sales volumes grew +0.0% in March. On top of m-o-m growth of +0.0% in February (revised up to +0.1%, just to add a bit of excitement to proceedings).
M-o-m non-food store sales volumes were up +0.5%, but foodstore volumes were down -0.7%. Online sales volumes were down -1.5%, but excitingly, automotive fuel sales volumes were up +3.2% to reach their highest level since May 2022. If only fuel were a retail category at all, with any bearing on the high street…
Nothing really to see here on this basis. But, at the same time, nothing to change the somewhat simplistic economist view of consumer trends and deviate from their textbook thinking.
…vs the Reality
The far more meaningful year-on-year figures are given zero mention in the ONS commentary. Anything but flat, but actually mildly disappointing, albeit with some heavy nuances around Easter and the timing thereof.
Retail sales values (exc fuel) grew y-o-y by +3.4%. Solid. Retail sales volumes (exc fuel) grew by +0.4%. More than solid. Annualised volume growth has been elusive ever since high inflation set in, but has now been achieved in two of the last three months. Implied shop price inflation stood at 3.0%, coming down nicely, although higher in grocery (5.0%) than in non-food (1.4%).
Foodstore sales values grew y-o-y by +4.3%, but volumes dipped by a disappointing (and very surprising) -0.7%. With lower levels of inflation, non-food sales values grew by +3.1%, but volumes were up by a very positive (and very surprising) +1.7%.
As already alluded to, Easter is a major distorting factor in seasonal retail sales patterns. It is a net positive in that it provides a major boost to overall spending, but inevitably gives rise to a massive spike and trough in demand, depending on in which month it falls. Unusually, this year it straddled two monthly camps. Easter Sunday fell on 31 March, the ONS reporting period for March was 25 February – 30 March. So, all the benefit of pre-Easter demand in these figures, but not that of Easter Monday (which will be captured in the April data).
But given that the former is likely to be stronger than the latter renders these figures for March slightly disappointing. In simple terms, the Easter demand spike was maybe not as ‘spikey’ as we would have liked it to have been.
Performance by sub-sector
Sub-sector performance was as varied as ever, but with some noticeable shifts away from recent trends.
Economic logic suggests that non-discretionary spend categories would perform better during times of cost-of-living crisis and consumers would generally trade down. As the economic outlook improves (as it is now), these trends would unwind. Based on retail sales data, the reverse is actually proving true.
Dispensing chemists (values -24.3%, volumes -25.4%) were by far the worst-performing sub-category in March. Having been one of the worst-performing categories over the past 18 months, second-hand goods stores are now seeing a surge in demand (values +107.6%, volumes +102.6%). Textiles sales have rebounded strongly out of nowhere (+33.6%, +29.2%) but footwear sales, so strong for so long, have abruptly fallen off a cliff (-7.4%, -8.6%).
Seasonal demand saw a sharp pickup in DIY (+7.7%, +5.4%) and garden centre (+7.3%, +7.6%) sales. Demand was ostensibly very strong for PCs & Telecomms (values +31.5%), but this must have been driven by promotional activity (volumes +42.7% and implied deflation of -11.2%). But weaker for other categories that may have expected an Easter boost, such as furniture (-7.6%, -3.5%). Clothing maintained its uncertain start to the year (+1.1%, -3.7%).
Online sales values grew by +1.7% y-o-y, below underlying retail sales growth (+3.4%), yet online penetration increased by +10bps to 25.9% through a m-o-m mathematical quirk (online +0.1% m-o-m, all retail +0.0% m-o-m).
For a more detailed and visual analysis, please refer to our accompanying Retail Sales dashboard.
Are we any the wiser?
Three months into the year and we should have a relatively clear picture as to the state of the consumer economy. Yet we don’t. January and February are odd months at the best of times, by far the quietest in the retail calendar, so it’s always dangerous to read too much into them. And March effectively only included half an Easter this time around.
So, the overall Q1 figures need to be treated with some caution. The ONS’ seemingly positive declaration that volumes were up +1.9% in Q1 versus the previous quarter carries neither weight nor credibility (the implication that we consumed more in the quietest two months of the year than we did in the two busiest?). The y-o-y comparisons may not be watertight, but they are infinitely more meaningful. Retail sales values were up +3.8% in Q1 (vs Q1 2023) and, more encouragingly, volumes were up +0.2%, albeit with an inconsistent direction of monthly travel.
While the general narrative may be improving, consumer demand remains uncertain. Fragile. Erratic. Volatile. Anything but flat.