30/8/2013: Retail Sales Dynamics: July 2013

Retails sales stats for July 2013 were released yesterday amidst a torrent of data releases for Ireland this week. With slight delay, here's my take on the core numbers. All referencing seasonally-adjusted data.

Core (ex-Motors) retail sales improved in value in July on seasonally-adjusted based, posting a rise of 2.32% m/m and 1.46% y/y.

• Current 3mo MA is at 95.9 - which means that value of sales is running at 4.1 percentage points below 2005 levels of activity. Previous 3mo MA was 95.5, which means the over the last 3 months there was virtually no growth in the value of retail sales compared to 3 months prior.
• Current 6mo MA is at 95.7 and this compares to higher 6mo MA for the previous period which stood at 96.8. In other words, last 6 months activity in retail sales, as measured by value, was lower than previous 6 months period.

Core (ex-Motors) retail sales improved in volume in July on seasonally-adjusted based, posting a rise of 1.31% m/m and the same y/y.

• Current 3mo MA is at 99.9 - which means that volume of sales is running at 0.1 percentage points below 2005 levels of activity. Previous 3mo MA was 99.2, which means the over the last 3 months there was some growth in the volume of retail sales compared to 3 months prior.
• Current 6mo MA is at 99.6 and this compares to higher 6mo MA reading for the previous period which stood at 100.5. In other words, last 6 months activity in retail sales, as measured by volume, was lower than previous 6 months period.

Meanwhile - a reminder - Consumer Confidence, measured by the ESRI has deteriorated m/m by 3.40% and there was a marginal rise of 0.74% y/y.

• Current 3mo MA is at 66.7 - which means that consumer confidence over the last 3 months period is running ahead of previous 3mo MA of 59.4. Broadly-speaking Consumer Confidence indicator moved in-line with core retail sales in value and volume over the 3mo periods.
• Current 6mo MA reading for Consumer Confidence is at 63.1 and this compares to lower 6mo MA reading for the previous period which stood at 59.8. In other words, Consumer Confidence continues to countermove vis-a-vis retail sales indices on 6mo average basis.

Couple of charts. First one illustrates three core indicators:

 
Chart above continues to show generally negative correlation between actual retail sales and Consumer Confidence indicator, as well as the general flat-line trend in the retail sales series for both indices over the last 20-21 months.

Next, relationship between Consumer Confidence and retail sales indices:

Lastly, my own Retail Sector Activity Index (RSAI) that take into the account dynamics and levels of all three indices: CSO's Retail Sales Indices (Value and Volume) and ESRI's Consumer Confidence index:

Per above, RSAI continues to run within the broad confines of the flat-trend average, with uptick in July being much flatter than in previous months.

Note: here are correlations between all four measures of retail sector activity health:

Summary conclusion: things are improving, but the sustainability of improvement is questionable, with 3mo averages divergent from 6mo averages. Consumer Confidence remains largely irrelevant to actual outcomes delivered by the sector. The base of activity remains low and we are now into 5 years-plus of effectively unchanging 'bouncing along the bottom' activity. 

31/7/2013: Retail Sales Dynamics: June 2013

Retail sales stats are out for June and anticipation (based on the booming Consumer Confidence index from ESRI) was for a significant uplift in sales. Alas, things turned out to be not what some expected. All data seasonally-adjusted.

• Value of core (ex-motors) sales fell 0.73% m/m in June and was up 1.28% y/y. 
• 3mo average through June 2013 stood at 95.1 down on 3mo average through March 2013 at 96.0.
• 6mo average through June was at 95.5, down on 96.8 6mo average through December 2012.
• Value of core sales in June 2013 was 5.75% below the average for the entire crisis period
• Volume of core (ex-motors) sales fell 0.50% m/m in June and was up 1.21% y/y.
• 3mo average through June 2013 stood at 99.2 down on 3mo average through March 2013 at 99.5, although the difference was minute.
• 6mo average through June was at 99.4, down on 100.4 6mo average through December 2012.
• Volume of core sales in June 2013 was 3.74% below the average for the entire crisis period.

Meanwhile, Consumer Confidence shot up 15.4% in June m/m and is up 13.3% y/y. 3mo average from consumer confidence is at 63.6 which is above 3mo average through March 2013 at 61.2. 6mo average is practically identical to 6mo average through December 2012.

Charts above show clear disconnect between retail sales (volume and value) and the reported consumer confidence index. The disconnect is bizarre. Firstly, neither current, nor lagged average consumer confidence has much to do with either volume or value of what consumers opt to purchase. Worse, since June 2008 through June 2013, Irish retail sales indices correlations with Consumer Confidence are -0.66 for value index and -0.60 for volume index. In other words, rising Consumer Confidence in Ireland tends to be associated with falling retail sales. It is worth noting that prior to the crisis - in January 2005 - December 2007 period, the above correlations were +0.72 and +0.74 respectively.

My own Retail Sector Activity Index has had a better fortune tracking overall activity in the retail sector:

 The above clearly shows the sustained 'flat at the bottom' period of retail sales overall activity (by weighted contributions of volume, value and forward confidence). The recent rise in the activity, driven so far solely by two factors: year-on-year dynamics still impacted by the losses made in May-June 2012  and by the bizarre rise in consumer confidence. It remains to be seen if the index can hold near a 14 months period high attained in June.

2/7/2013: Irish Retail Sales May 2013: A View from a Hurricane Shelter

Retail sales stats were relaxed few days back and I had no chance to update the series until now. So here's the headline analysis for May 2013.

Table below summarises the latest data:

The Retail Sales Activity Index is my own index based on volume and value of core retail sales and consumer confidence indicators, weighted to reflect both prices and volumes contributions to sector activity as measured by sector employment and contribution to the national accounts.

Charts below show dynamics:

You can see in the last chart above the flat (negative slope, but basically zero) trend that is prevailing in the series since January 2009. Same trends are basically present in ex-motors, automotive fuel and bars sales, although May 2013 data did come in at an upside, without breaking the overall trend. But the same is not true for the motor trades, which are heading South once again and along what appears to be a turning trend:

27/4/2013: Bars, Pubs, Recession Craic

I recently watched an Irish comedian (let's keep the names out of this) quip that Irish people are not having that bad of a time during this recession, as we are still going out for pints, and that is all that matters in measuring our happiness.

Obviously, humor aside, there can be some truth in this. Most of entertainment and 'cultural' life in this country revolves about the pub or (in shwankier neighborhoods - around a cocktail bar). So bars sales can be a somewhat decent indicator of some sort of the social well-being in this country.

How did bar sales fare in the Great Recession? Four charts:

By value (chart above),

• Bar sales were down 18.1% on average in the period from January 2008 through present (March 2013), aka pre-crisis period, compared to the crisis period from January 2005 through December 2007.
• In March 2013 they were down 14.6% on pre-crisis average. 3mo average through March 2013 was down 1.5% y/y.
• So by value of sales, we are not heading for the pub as much.
• Worse, compared to both All Retail Sales and to Retail Sales of Food - Bars sales are doing much worse. 
• Noting that Food sales are running above pre-crisis average, both currently and on the basis of crisis average, and also noting that Food sales are signals of us staying more at home, rather than going out to pubs and bars and restaurants, there is no indicator here that we are having good times during this recession. At least not in the pubs.

Next: volume of sales:

Again as with value of sales, volume of sales index shows that the above conjecture of 'good times' is not holding up. In fact, comparative dynamics for retail sales in bars in volume are worse than dynamics in value.

Here's a more distilled version, showing dynamics in bars sales compared to all retail sales:

And here's an illustration of divergent dynamics between food and bars sales:

Seems like if we are having 'craic' in this recession, it is not in our locals or in the Temple Bar, but with a bottle of cheaper booze at home, drumstick in hand, slippers on...

26/4/2013: Another indicator turns South: Irish Retail Sales March 2014

Off the start, let me say I am sorry that I have to bring one set of bad news after another. Living, working, raising kids and building my family future in Ireland means that I have as much 'skin in the game' of seeing Irish economy recover from this crisis as any one of us.

With that in mind, here are the latest statistics from the CSO on Irish retail services activity in March 2013. These make for ugly reading.

First, quoting CSO own release:

"The volume of retail sales (i.e. excluding price effects) decreased by 1.9% in March 2013 when compared with February 2013 and there was a decrease of 3.6% in the annual figure.  If Motor Trades are excluded, the volume of retail sales decreased by 1.8% in March 2013 when compared with February 2013 and there was an annual decrease of 1.6%.

There was a decrease in the value of retail sales in March 2013 when compared with February 2013 of 1.9% and there was an annual decrease of 4.1% when compared with March 2012.  If Motor Trades are excluded, there was a monthly decrease of 1.8% in the value of retail sales and an annual decrease of 1.7%."

So, both volumes and values of sales, both core (ex-Motors) and overall have tanked in m/m and y/y terms. This is outright ugly.

Details of dynamics, all for ex-Motors sales:

• Value Index for core retail sales 3mo MA through March 2013 stood at 95.7 down from 3mo MA through December 2012 which read 97.1 (a 3mo back decline of 2.38%). 6mo MA stood at 96.4 against 6mo MA through August 2012 at 95.8. Which means deterioration set in over the last 3 months. Volumes of sales is now down 5.2% on 2005 average levels and 6.42% down on crisis period average activity levels.
• Volume Index for core retail sales 3mo MA through March 2013 stood at 99.0 down from 3mo MA through December 2012 which read 100.9 (a 3mo back decline of 3.07%). 6mo MA stood at 100.0 against 6mo MA through August 2012 at 99.4. Which means deterioration in value of sales also set in over the last 3 months. Values of sales are now down 2.2% on 2005 average levels and 5.35% down on crisis period average activity levels.
• Meanwhile, ESRI-reported Consumer Confidence Index rose to 60.0 in March 2013 against 59.4 in February, with 1.01% m/m rise and down only 0.99% on March 2012. 
• On 3mo MA basis - while both Volume and Value of core activities fell, Consumer Confidence index rose at a massive 20.5% rate. Bizarre stuff.
• Both Volume and Value of sales in March 2013 stood below 2005 average, while Consumer Confidence stood 18.5% above! Both measures of retails sales have dropped in march 2013 compared to crisis period average, but Consumer Confidence rose 8.3%. Even more bizarre stuff.
• My Retail Sales Activity Index fared much better than the ESRI Consumer Confidence Indicator - down m/m 1.22% and down 1.46% y/y, while up only slightly (+0.20%) on 2005 average and down 3.11% on crisis period average.

Charts:

Core Conclusions: Latest retail sales figures are outright ugly. These signal continued downside pressure on the domestic economy and, given the dynamics in personal income and earnings, this momentum appears to be driven by the overall consumer sentiment and lack of confidence in future income dynamics, related to Government policy (property tax and personal insolvency regime reforms) and to banks' interest rates policies (consumers expecting rises in the rates, confirmed by this week's ARM rate hikes by AIB & its subsidiaries). The economy is once again putting us on warning: turn downward in economic activity can be expected as a major risk.

30/3/2013: Retail Sales in February: Deadman Still Walking

With all the Cypriot Meltdown excitement as the newsflow, Irish data releases slipped into 'noise background' this week, so time to fix that.

March 28th we saw the release of the retail sales data for Ireland for February 2013. The headline from CSO read: "Retail Sales Volume increased 0.3% in February 2013" which obviously is the good news. Except, in reality, reading below headline we discover that:

"The volume of retail sales (i.e. excluding price effects) increased by 0.3% in February 2013 when compared with January 2013 while there was no change in the annual figure.  If Motor Trades are excluded, the volume of retail sales decreased by 0.2% in February 2013 when compared with January 2013 and there was an annual increase of 1.0%."

Wait a second, ex-motors, retail sales fell 0.2% in volume in m/m terms, but were still up 1.0% y/y. Oh, and durable goods (e.g. Electrical Goods) sales were down again.

And in value terms? The stuff that makes retail businesses actually hire or fire workers and pay or not pay taxes?.. Much the same:

"The volume of retail sales (i.e. excluding price effects) increased by 0.3% in February 2013 when compared with January 2013 while there was no change in the annual figure.  If Motor Trades are excluded, the volume of retail sales decreased by 0.2% in February 2013 when compared with January 2013 and there was an annual increase of 1.0%."

Let's see some dynamics:

• Value of sales ex-motors averaged 96.6 in 3mo through February 2013 against 97.0 in previous 3mo period. 6mo average through February 2013 was 96.8 (virtually identical to 3mo average), implying effectively zero growth over 6 months period, although previous 6mo period average was 95.5.
• Over longer horizons: 2006-2007 average of the index stands at 112.1, which was down to 2010-2011 average of 96.6 and 2012 full year average of 96.0, and January-February 2013 average of 96.5. You can tell the that whole volume 'activity' is just a flat trend since January 2011 with some volatility around it.
• Volume of activity slipped on 3mo average through February 2013 to 100.1 from 100.6 in 3 months through November 2012. The rate of decline on 3mo averages basis in volume was more pronounced than for value index, which is a story consistent with pretty much the entire crisis - retailers are only able to shift volumes at the expense of revenues they get. Consumers are getting better deals, but this also means employment in the sector is unlikely to increase.
• 2012 average of 99.6 is pretty much matched by january-February 2013 average of 99.7 - again, flat line growth trend. And as before that one runs from January 2011.

I keep tracking Consumer Confidence here, to show that the whole idea of 'confidence' when not underpinned by supportive fundamentals is not a reasonable concept for anchoring one's expectations about real economic performance.

Here, per usual, updated charts linking (or rather showing the lack of links) confidence to retail sales indices:

Lastly, recall that I run my own index of Retail Sector Activity (RSAI) that is a much stronger correlative for retail sector indices:

Two things jump out from the chart above:

1. The overall flat-line trend in activity in the retail sector over January 2009-present period, showing that, in principle, there is no recovery and there is no sustained signal of one coming so far in the short term future.
2. Forward-looking RSAI has slipped (on 3mo average basis) from 107.9 in 3 months through November 2012 to 106.0 in 3 months through February 2013. M/m RSAI is down 1.83% and y/y it is up 1.84%, tracking correctly the overall dynamics in the CSO indices.

Hence, my expectation is for more of the same in the next 3 months, with retail sales slipping slightly in volume and value, posting closer to zero growth in y/y terms over Q2 2013. The deadman is still walking, for now... and the 'turning point' is still some corridors away...

5/3/2013: Another Consumer Confidence Report Goes Off-Road

To the 'turning around' reports from the Eastern Front ca 1943... err... 2013... per KBC Ireland/ESRI Consumer Sentiment Index, consumer sentiment in Ireland fell in February to 59.4 compared to January reading of blistering 64.2. The report gets 'serious' on dynamics: "The three-month moving average also decreased from 59.3 to 57.8. The index fell below the average for the last 12 months (61.9)."

Let me add some more dynamics to this. First, let's look at January 2012 data (since we do not have Retail Sales Indices for February yet):

• Current 3mo average for Retail Sales Value Index is 96.8, down from 96.9 for 3mo average through October 2012, Volume is up from 100.3 to 100.5. Overall, indices are basically flat (+/-0.1% is not a significant change by anyone's standards, even for this Government);
• 3mo average of Consumer Confidence index through January 2013 was 59.3 down on 63.7 for the 3 months though October 2012.
• 6mo average, however, shows a slightly different story: Value of sales is up from 95.3 average reading for 6 months through June 2012 to 96.8 average for 6 months through December 2012; Volume is up from 98.8 to 100.4 over the same period, and Consumer Confidence is up from 105.8 to 107.7.

KBC/ESRI Consumer Sentiment Index is about as good of a gauge for retail sector activity here as the elephants' herd gate tempo is of use for timing the Swan Lake pas de deux. If you don't believe me, here's a chart:

In the nutshell, consumer confidence hit the bottom in July 2008 and since then things were, apparently improving. So much so that by June 2012 Value of Retail sales has hit the absolute record low, whilst Volume of sales did same in October 2011. There is a gentle uptrend in consumer confidence since mid-2008 against a downtrend in both Volume and Value of core retail sales.

Taken on 3mo average basis (to cut down on volatility), Confidence indicator has virtually nothing to do with Retail Sales, except for high sounding press release comments from the experts:

Per ESRI: "The promissory note deal was announced roughly half way through the survey period. The announcement of the deal would appear to have had some positive impact, with a preliminary analysis of responses showing an improvement in sentiment after the deal. We await the March results to see if the impact on sentiment is sustained.”

Indeed, we await... eagerly. 


In addition, Austin Hughes, KBC Bank Ireland, noted that [comments are mine] “A disappointing aspect of the sentiment data for February was that the decline was broadly based. Consumer spending power remains under pressure and there is little to suggest a dramatic improvement in Irish economic circumstances that would cause a ‘feel good’ factor to emerge anytime soon. [A revelation of most profound nature] 

"About the best that can be expected is a slow easing in the ‘fear factor’ that would encourage a gradual increase in spending. This may not be spectacular but it still represents significant progress. [What progress he might have in mind beats me, as Retail Sales figures continue to show little signs of reviving from already abysmally low levels]
 

"...The Irish consumer is seeing an improvement in ‘macro’ conditions across the economy but their personal finances remain under pressure. [In other words, we are in that ESRI & KBC-lauded 'exports-led recovery' boom, folks, where you and I get screwed, while MNCs get to report greater 'sales'] 

"It may be that some consumers had unrealistic expectations as to what a deal could achieve. [Did Government enthusiasm in over-selling the potential impact propelled enthusiasm of consumers for the 'deal'?] 

"More generally, it remains the case that consumers face significant further austerity in the next two Budgets. [Doh! We'd be discovering new Solar Systems, next] 

"The deal may ease the pain somewhat but it doesn’t entirely remove it. So, we shouldn’t expect a surge in confidence. That said, the fragile situation of Irish consumers means they are sensitised to bad news. So, failure to reach a deal could have seen sentiment deteriorate quite sharply.” [In other words, we were saved from an apocalyptic collapse of consumer confidence by the wisdom and the heroic efforts of the Government... and ATMs are still working!]

Irony has it, the same 'positive newsflow' that went along with the index slide this time around also supported (according to the authors) index surge in January - see here for January release comments: http://www.kbc.ie/media/CSI.Jan20131.pdf Who says you can't have a cake and eat it at the same time?

I don't know what to do - laugh or cry... cup of coffee is needed, however, as much as some serious improvements in survey to bring it closer to reality on the ground. It is needed because:

• While Consumer Confidence index through January 2013 (to take period consistent with data availability for both Retail Sales Indices and Consumer Confidence Index) was up 13.4% y/y, while actual retail sales rose just 0.94% in Value and 0.71% in Volume. 
• Compared to 2005 average, Retail Sales Value was down 3.42%, Volume was down 0.22% and Consumer Confidence was up 26.82%.
• Even with February 2013 moderation, Consumer Confidence is now up 17.33% on 2005 average.
• Worse than that, taking Crisis Period averages (January 2008-present), Value of Retail Sales is now running at 96.6 against the average of 101.17 (or 4.51% below average), Volume at 99.8 against the average of 103.49 (or 3.56% below average), whilst Consumer Confidence is running at 7.37% above the Crisis Period average of 55.32.