Graph: Food and beverage commodity prices: annual % change, Jan 2011 – Jan 2012
See also: Graph: Cotton prices plummet – clothing deflation to return?
* Aggregate of cereal, vegetable oils/protein meals, meat, seafood, sugar, bananas, oranges. Of these categories, at January 2012, only meat recorded positive year-on-year inflation.
** Aggregate of coffee, cocoa beans, tea. All of these categories recorded negative year-on-year price inflation at January 2012.
Source: IMF
Graph: Consumer confidence levels across Europe, December 2011 – January 2012 (values shown)
Notes: Confidence levels are the balance of positive and negative responses from consumers to questions on expected developments in households’ financial situation, the economic situation, unemployment, and savings over the next 12 months. Data is not published for the Republic of Ireland.
Source: Eurostat
Cotton prices – which underpinned positive inflation in clothing prices in the UK in 2010 and 2011 – fell back sharply across much of 2011. Together with the annualisation of the UK VAT rise of January 2011, it is hard to see how deflation cannot return to the clothing category in 2012.
Graph: Average monthly “A” cotton prices, cents per lb, Jan 2010 – Dec 2011
Source: National Cotton Council of America
Estonia was the most recent entrant into the Eurozone, adopting the currency on 1 January 2011. Despite the Eurozone crisis, the country has subsequently reported very strong economic growth which has translated into almost equally strong retail sales growth.
Graph: Year-on-year real-terms GDP growth in Estonia, Q1 2010 – Q3 2011:
Source: Statistics Estonia
The latest official retail sales data runs to November 2011 but given recent growth rates the retail sector in Estonia is likely to have seen one of the strongest Christmases in Europe.
Graph: Year-on-year retail sales growth (current prices and real-terms) in Estonia, Jan 2010 – Nov 2011:
Note: All retail incl. automotive fuel.
Source: Statistics Estonia
Greek retail federation ESEE estimated that Christmas 2011 retail sales were down 30% year-on-year, the worst performance “in decades”.
Official retail data, released at the end of December 2011 and running to October, confirm ongoing declines, albeit at lower levels than that estimated by ESEE.
Graph: Year-on-year growth in total retail sales in Greece, including and excluding automotive fuel, Jan 2010 – Oct 2011
(p) Provisional.
Source: Hellenic Statistical Authority
There has recently been criticism of the Office for National Statistics’ retail sales growth rates as overly optimistic. However, the survey is the most comprehensive of its type, with the ONS claiming it covers around 95% of all retail sales in the UK. Accepting this robustness, this post looks at grocery retail sales data and considers the implications of omittances in calculating consumer prices inflation (CPI) for the real-terms growth rates (i.e. growth stripping out inflation) in retail sales.
CPI and retail sales figures
The ONS retail-sales survey collects data in current-value form and uses deflators derived from the official CPI figures to strip out the effects of inflation and so calculate real-terms growth. But there are questions over CPI and its possible over-statement of the inflation actually being felt by consumers, especially in food shopping. This would imply that the deflators used to calculate the real-terms retail-sales growth figures are too high. In turn, this suggests real-terms retail-sales growth is higher than that calculated by the ONS.
The figure below charts the official retail sales data recorded by the ONS in current prices, and calculated by the ONS in real terms.
Figure 1: Food retailers’ sales growth: annual % change, Jan – Nov 2011
Source: ONS
The accuracy of CPI in grocery
The particular problems of applying CPI to grocery retailing include:
These exclusions are significant – in July 2011 Nielsen estimated 39% of grocery spending was on promoted goods. Although any straight discounting will be factored into CPI, any multibuy or other irregular offers will not, so consumers taking advantage of the numerous 2-for-1s, for example, do not register. Consequently, consumers are not feeling grocery inflation anywhere near the 4.6% grocery deflator figure given by the ONS (at November 2011).
In July 2011, Waitrose MD Mark price claimed that same-product food inflation was running at around 3% year-on-year, and with consumers downtrading the rate being felt by customers was more like 2.1%. At that time, the deflator being used for food retail figures by the ONS was 5.9%. If we extrapolate the ratios between these two figures (3% and 5.9%) across 2011, we get an alternative “Waitrose-derived” deflator, charted below; this is simplistic but suggestive of a potential alternative real inflation rate in food retailing.
Figure 2: ONS deflator and alternative deflator for food retailers’ retail sales, Jan – Nov 2011
Source: ONS/public domain
Applying the alternative deflator to retail sales data
Applying this alternative grocery-prices deflator to the current-prices food retail sales growth published by the ONS produces an alternative set of real-terms data. Is this actually closer to the real growth rates being seen in food retailing?
Figure 3: Food retailers’ sales growth: annual % change, Jan – Nov 2011
Source: ONS/public domain
Information-society statistics published by Eurostat on 14 December 2011 include the latest national-level and EU-wide data on the percentage of individuals claiming to have purchased goods or services online in the preceding 12 months. The data are currently topline only: category breakdowns have not yet been published.
Graph: Percentage of all individuals agreeing that they purchased goods or services online in the preceding 12 months, 2010 & 2011 (values shown).
Source: Eurostat
