Retail sales, Great Britain: June 2016

The volume of retail sales in June 2016 is estimated to have increased by 4.3% compared with June 2015.

The underlying pattern in the quantity bought, as suggested by the 3 month on 3 month movement, increased by 1.6%.

Compared with May 2016, the quantity bought in the retail industry is estimated to have decreased by 0.9%.

Average store prices (including petrol stations) fell by 2.5% in June 2016 compared with June 2015.

The amount spent in the retail industry decreased by 0.9% compared with May 2016, and increased by 1.5% compared with June 2015.

The value of online sales increased by 14.1% in June 2016 compared with June 2015, and increased by 0.5% compared with May 2016.

Revisions in this release were primarily caused by re-referencing the indices to 2013 = 100 to align with the National Accounts estimates (only affecting volume data). There were also revisions where late data were incorporated. The earliest revisions point for current price, non-seasonally adjusted data was June 2015. More information on revisions can be found in the background notes.

This bulletin presents estimates of the quantity bought (volume) and amount spent (value) in the retail industry for the period 29 May 2016 to 2 July 2016. Unless otherwise stated, the estimates in this release are seasonally adjusted.

The estimates in this release are based on a monthly survey of 5,000 retailers, including all large retailers employing 100 people or more and those with annual turnover of greater than £60 million who employ 10 to 99 people. It is estimated that this survey covers approximately 95% of all known retail turnover in Great Britain.

The quality of the estimate of retail sales

Retail sales estimates are produced from the Monthly Business Survey – Retail Sales Inquiry (RSI). The timeliness of these retail sales estimates, which are published just 3 weeks after the end of each trading period, makes them an important early economic indicator. The industry as a whole is used as an indicator of how the wider economy is performing and the strength of consumer spending. Current price non-seasonally adjusted data are revised for the previous 13 published periods. More information about the data content for this release can be found in the background notes.

Revisions are an inevitable consequence of the trade-off between timeliness and accuracy. The response rate in June 2016 was 61.8% of questionnaires, accounting for 85.0% of registered turnover in the retail industry. Therefore, the estimate is subject to revisions as more data become available.

All estimates, by definition, are subject to statistical uncertainty. For the retail sales index, we publish the standard error associated with the non-seasonally adjusted estimates of year-on-year and month-on-month growth in the quantity bought as a measure of accuracy. More information on these standard errors can be found in the background notes and in the quality tables of this release.

We are continually working on methodological changes to improve the accuracy of the retail sales estimates; progress on these can be found on the continuous improvement page.

The datasets offer different ways to access the data. They include:

• non-seasonally adjusted and seasonally adjusted volume and value indexes by industry
• year-on-year and month-on-month growth rates by industry

At a glance

In June 2016:

the quantity bought in the retail industry (volume):

• increased by 4.3% compared with June 2015; this was the 38th consecutive period of year-on-year growth
• decreased by 0.9% compared with May 2016

the amount spent (value):

• increased by 1.5% compared with June 2015
• decreased by 0.9% compared with May 2016

Amount spent in the retail industry

In the 5 week reporting period during June 2016, the amount spent in the retail industry was £36.1 billion (non-seasonally adjusted).

This compares with:

• £29.2 billion in the 4 week reporting period for May 2016
• £35.7 billion in the 5 week reporting period for June 2015

This equates to an average weekly spend of:

• £7.2 billion in June 2016
• £7.3 billion in May 2016 and
• £7.1 billion in June 2015

Main points

In June 2016:

• all store types except textile, clothing and footwear stores showed increases in the quantity bought compared with June 2015

• non-seasonally adjusted data show that the prices of goods sold in the retail industry (as measured by the implied price deflator) decreased by 2.5%; this was the 24th consecutive month of year-on-year price falls

• all store types saw falls in average store price compared with June 2015; the largest fall was shown in petrol stations

More information on how the implied price deflator and other estimates in this release are calculated can be found in section 3 of the background notes.

There has been sustained growth, spanning 31 months in the 3 month on 3 month movement in the quantity bought: the longest period of growth since records began in June 1996. Looking at the quarter months of March, June, September and December, the last time we saw a quarter-on-quarter contraction was Quarter 4 (Oct to Dec) 2012, when the quantity bought decreased by 1.0%.

In Quarter 2 (Apr to June) 2016, there was an increase of 1.6% in the quantity bought compared with Quarter 1 (Jan to Mar) 2016. This is the largest quarter-on-quarter increase since Quarter 4 (Oct to Dec) 2014, when the quantity bought increased by 2.3%.

Figure 1 shows that the quantity bought remained relatively constant until late 2013, suggesting consumers bought the same quantity of products each period. However, due to rising average prices, the amount spent in the retail industry increased strongly over the same period.

In 2014, the quantity bought began to increase at a faster pace than the amount spent as average prices began to fall, suggesting consumers bought more goods as prices fell.

Figure 2 looks in more detail at quantity bought and average store prices for the 2 main contributors within the retail industry, food and non-food, which contribute approximately 83 pence in every pound spent in the retail industry. Non-store retailing and petrol stations account for the other 17 pence spent in the pound.

Average prices in food stores increased rapidly during the early part of the time series while the quantity bought stayed fairly static. In more recent periods, as prices have fallen the quantity bought has increased, but not to a significant level. This suggests that, consumers do not necessarily buy more, rather they may change to better quality or more expensive products.

The story is slightly different for non-food stores, where we have seen the quantity bought and price fairly static in the early part of the time series; however, as prices started to fall in late 2013 the quantity bought increased significantly. This might suggest that as prices fell consumers bought more in these stores, particularly with the savings made by falling prices in other store types such as food stores and petrol stations.

Seasonally adjusted internet sales data are published in the Retail Sales Inquiry (RSI) internet tables and include:

• a seasonally adjusted value index
• year-on-year and month-on-month growth rates

Internet sales are estimates of how much was spent online through retailers across all store types in Great Britain. The reference year is 2013=100.

Main points:

• average weekly spending online in June 2016 was £944.3 million; this was an increase of 14.1% compared with June 2015

• the amount spent online accounted for 14.2% of all retail spending, excluding automotive fuel, compared with 12.6% in June 2015

Table 3 shows the year-on-year growth rates for total internet sales by sector and the proportion of sales made online in each retail sector.

The retail industry is divided into 4 retail sectors:

• predominantly food stores (for example, supermarkets, specialist food stores and sales of alcoholic drinks and tobacco)
• predominantly non-food stores (for example, non-specialised stores such as department stores, textiles, clothing and footwear, household goods and other stores)
• non-store retailing (for example, mail order, catalogues and market stalls)
• stores selling automotive fuel (petrol stations)

Figure 3 shows that for every pound spent in the retail industry:

• 40 pence was spent in food stores
• 43 pence in non-food stores
• 8 pence in non-store retailing
• 9 pence in stores selling automotive fuel

Using these as weights, along with the year-on-year growth rates, we can calculate how each sector contributed to the total year-on-year growth in the quantity bought.

In June 2016 compared with June 2015, all 4 main retail sectors saw an increase in the quantity bought (volume) and amount spent (value). The largest contribution in the quantity bought came from non-food stores, while the largest contribution in amount spent came from non-store retailing.

In June 2016 compared with May 2016, 2 of the 4 main retail sectors (food stores and non-food stores) saw a decrease in the quantity bought (volume), while 3 of the 4 main sectors (non-store retailing, non-food stores and food stores) saw a decrease in the amount spent. The largest downwards contribution for both quantity bought and amount spent came from food stores.

Table 4 shows how sales varied among different-sized retailers. It shows the distribution of reported change in sales values of businesses (from the RSI sample), ranked by size of business (based on number of employees).

Businesses with 40 to 99 employees saw the largest growth in the amount spent in June 2016 compared with June 2015 (14.1%). Businesses with 100 or more employees showed an increase of 0.3%.

More information on the performance of the retail industry by store type and size can be found in the Business Analysis dataset.

Figure 6 compares a rolling 3 month period with the same period in the previous year and highlights that the volume of retail sales started to grow strongly from mid-2013. The latest data show an increase in retail sales growth from 4.5% in the 3 months to May 2016 to 4.9% in the 3 months to June 2016. The rolling 3 month on 3 month a year ago growth in retail sales has averaged 4.2% since the start of 2016, which is lower than the 2015 average of 4.5%.

From Figure 6, 3 distinct periods emerge. Between June 2007 and July 2008, retail sales volumes were experiencing continuous growth, although to a different degree. Growth in inflation, known as Consumer Prices Inflation (CPI), was lower than average weekly earnings over most of this period; which resulted in rising real earnings, an indicator of the purchasing power of consumers. Moreover, between June 2007 and July 2008, consumer credit increased by 8.8%, which may have been a factor driving retail sales growth.

However, between August 2008 and May 2013, the volume of retail sales fluctuated between periods of contraction and expansion, which may be partly explained by the economic climate over this period, and coincided with a reduction in consumer credit of 24.8%. Moreover, growth in average weekly earnings was lower than inflation over most of the period, which implies that earnings fell in real terms.

The third period shown in Figure 6 started in June 2013, when growth in volume terms began to increase notably, despite average weekly earnings growing at a slower rate than CPI until September 2014. Moreover, since June 2013, consumer credit has followed a broadly upward trend, growing by 17.7% between June 2013 and May 2016. Between June 2013 and June 2016, the price level (shown by the implied deflator) fell by 5.4%, coinciding with 12.4% growth in the volume of retail sales over this period. In addition, this upturn in spending has been accompanied by a decline in the savings ratio, from an average of 8.6% over the period 2008 to 2012, to an average of 6.5% over the period 2013 to Quarter 1 (Jan to Mar) 2016.

Figure 7 compares a rolling 3 month period with the same period in the previous year for clothing sales. Since 2007, growth in clothing sales has averaged around 2.9%. However, since the beginning of the year, growth in clothing sales has been falling. This slowdown in clothing sales is also reported by the Bank of England in its Agent Summary of Business Conditions report, which also cited weak growth for footwear. According to the British Retail Consortium, there was a decline in sales in the fashion categories, especially in women’s fashion and footwear, following one of the wettest starts to a UK summer since records began.

In general, external indicators support the trend in retail sales over the last few months. According to the Confederation of British Industry’s June 2016 Distributive Trades Survey, retail sales volumes held broadly steady in the year to June with sales reported to be above average for the time of year.

According to the British Retail Consortium, Britain's retailers saw stable sales despite the fall in sterling following the EU referendum vote. Similarly, the Bank of England’s Agent Summary of Business Conditions suggests the growth in the value of retail sales had changed little over the second quarter of 2016.

The only international estimate of retail sales available for June 2016 was published by the US Census Bureau on 15 July 2016. In its advanced retail sales estimates for June 2016, the amount spent in the US retail industry, including motor vehicles and parts and food services, increased by 0.6% compared with the previous month and increased by 2.7% compared with June 2015. Total sales for the 3 months to June 2016 were up 2.6% from the same period a year ago.

The latest estimates of the volume of retail trade across the European Union, published by Eurostat on 5 July 2016 for May 2016, show the seasonally adjusted volume of retail trade increased by 0.4% in both the euro area (EA19) and EU28 when compared with April 2016. Compared with May 2015, the retail sales index increased by 1.6% in the EA19 and by 2.8% in the EU28. Note that an accurate comparison cannot be made as Eurostat data are calculated on a 2010 = 100 basis, while data for Great Britain are calculated on a 2013 = 100 basis.