Retail sales update: Retail sales growth lifted to 3.0% y/y in 2017 from 1.7% y/y in 2016

13 Feb 2018

Annabel Bishop

Chief Economist

Figure 1: Annual real retail sales growth
  • Retail sales growth moderated to 5.3% y/y in December from 7.9% y/y (revised down from a prior 8.2% y/y) in November.
  • November retail sales growth accelerated from the 3.5% y/y rise in October, with this lift attributed to Black Friday discounts that likely encouraged consumers to bring forward purchases, ahead of the festive season. This likely had some dampening effect on December sales.
  • In December, the highest growth of 14.1% y/y was recorded by all ‘other’ retailers (see figure 3).
  • Based on weightings, the largest contributors to the 7.9% y/y increase in the headline figure were all ‘other’ retailers, general dealers, as well as textile and clothing retailers with each contributing 1.4%.
  • The seasonally adjusted measure, which is used to determine GDP, signals that the sector will make a positive and larger contribution to Q4.17 GDP than in Q3.17. In particular, on a seasonally adjusted basis, retail sales grew by 2.2% q/q in Q4.17 compared to 1.5% q/q in Q3.17.
  • In 2017, retail sales growth rose by 3.0% y/y compared to the 1.7% y/y lift in 2016 (see figure 1).
  • The increase can mainly be ascribed to the double digit growth in the all ‘other’ retailers category (see figure 2) of 11.3% y/y which translated to a contribution of 1.2%. The other main contribution, of 0.5%, stemmed from general dealers, on growth of 1.1% y/y.
  • Growth in the ‘other’ retailers category was influenced by increased online shopping, at retailers without physical outlets, and trade in second-hand goods. Weight and sampling amendments implemented in 2017 likely also had an effect on the growth outcome.
  • Decelerating inflation during 2017, to an average of 5.3% y/y from 6.4% y/y in 2016, will have provided some relief to household finances and likely aided the performance of the retail sector in 2017.
  • CPI inflation is expected to moderate further in 2018 to 4.8% y/y, however the favourable effect could be partially countered by tighter fiscal policy, with tax increases expected to be announced in the 2018 Budget. We expect household consumption growth to remain relatively modest in 2018 at 1.5% y/y compared to 1.3% in 2017.
Figure 2: Contributions to year to date retail sales by type of retailer
Figure 3: Retail trade sales by type of retailer (at constant prices)