November retail sales were weaker than expected, but the underlying trend remains surprisingly robust. Headline retail sales fell by 0.4% m/m (consensus: -0.3%, BarCap: 0.0%) from an upwardly revised 1.0% rise previously.

Core retail sales, which exclude auto fuel, fell significantly more than expected, by 0.7% (consensus: -0.4%, BarCap: -0.2%) from an upwardly revised 0.9% increase in October. Significant revisions to previous data have pushed the three-month moving average higher, providing evidence that sales might not be as weak as the headline figures suggest.  
 
Nominal sales were also weaker than the previous month, with the headline measure falling by 0.1% and core retail sales falling by 0.5%. Nevertheless, the less volatile three-month moving average measures indicates nominal sales continue to grow at a solid pace, and significantly faster than real sales (see chart), highlighting the depressing effect of high inflation. This could indicate that once inflationary pressures abate we could see consumer spending pick up significantly. This is in line with our forecast for consumption to fall this year but to start gaining momentum in the second half of next year as inflation falls rapidly.
 
Nevertheless, the near-term outlook for retail sales remains very challenging, and the reported monthly fall chimes with anecdotal evidence suggesting a tough Christmas trading period.


source: BarCap