The further rise in retail sales in October means that retail sales are now 6.8% above their pre-virus level. But the current lockdown means that retail sales, and total consumer spending, will probably fall outright in November.
Shift towards online supports sales before lockdown
- The further rise in retail sales in October means that retail sales are now 6.8% above their pre-virus level. But the current lockdown means that retail sales, and total consumer spending, will probably fall outright in November.
- At face value, the 1.2% m/m gain in retail sales volumes in October (consensus 0.0%, CE 0.5%), suggests that the tiered COVID-19 restrictions didn’t change households spending behaviour much. Indeed, spending in department stores rose by 3.1% m/m and the mini-housing boom continued to boost sales of household goods, which rose by 3.2% m/m. There was also little evidence of the stockpiling that occurred before the first lockdown as the volume of food sold in October fell by 0.2% m/m. (See Table 1.) But that may be because after binging during the first lockdown, consumers were trying to be a little healthier in October. Sales of alcohol and tobacco fell by 4.7% m/m in October to their lowest level since April 2019!
- However, the familiar COVID-19 shift away from the high street towards online shopping was also evident. Despite the strong sales in department stores and household goods, overall non-food sales rose by just 0.8% m/m. At the same time, the volume of goods sold online rose by 6.4% m/m, the first gain since June. (See Chart 1.) The proportion of goods sold online rose from 27.6% in September to 28.5% in October. This was below the 33.8% peak in May, but still well above the 20.1% share of goods sold online in February.
- Internet sales will probably rise again in November, but the closure of all non-essential shops means that overall retail sales will probably fall. Indeed, the GfK measure of consumer confidence dropped from -31 in October to -33 in November, which left it only a fraction above the low of -34 in April during the first lockdown. Consumers have an especially negative outlook for the economy over the next year. This balance stayed at -50, which was only slightly better than the -57 nadir reached in May.
- Admittedly, the near-term outlook does look pretty bleak for consumers. But the encouraging news on vaccines is improving the economic outlook for next year, which could result in consumer spending return to its pre-virus peak in 2022 rather than in 2023.
Chart 1: Retail Sales Volumes (February 2020 = 100)
Table 1: Retail Sales Volumes
Retail ex petrol
Thomas Pugh, UK Economist, +44 (0)7568 378 042, email@example.com