How useful is retail data to tell a story about the economy?

Black Friday is on the approach again, and with it reams of information about how the UK consumer is faring – through the lens of retail data.

As data consumers and analysers, we have a wealth of reports each month to dig through. November 2024 is no less than usual.

This includes Kantar grocery market share figures and price inflation on 12 November; Office for National Statistics (ONS) UK monthly retail sales figures and the GfK UK Consumer Confidence Survey on 22 November; andBritish Retail Consortium Shop Price Index on 26 November.

Black Friday itself falls on 29 November, which usually produces some snapshot reports from banks and other payments firms and institutions. Barclays, for example, typically provides its own report.

This is all well and good, but how much can it tell us about the wider economy that can be useful to those of us in finance, journalists or even the general public?

The UK consumer

The UK economy is driven heavily by consumer spending. It accounts for 60% of our GDP, according to the ONS.

A real change in consumer confidence, if sustained, can therefore have quite a significant impact on how the economy at large is faring.

In 2024 the development of this has been modestly positive. However, we are well below the ebullient days of 2021 (remember when everyone had all that extra cash during the pandemic?).

That’s probably good news for inflationary pressures, but it leaves economic growth without a key driver to boost overall consumption.

And there are things that can snuff this improving confidence out. The big one being a Budget that hits incomes. This is why Labour has been at pains to say it won’t target “working people” (which in practice means not hiking income tax, national insurance or VAT).

VAT is the tax that most directly affects consumption because it is straightforwardly a tax on spending, although a myriad of VAT exemptions make this more complicated depending on the sector.

In answer to the original question, what can we infer from these various consumer reports each month, and how does that matter to those of us in the money game?

In the short term, like GDP numbers, not huge amounts. But we can make bigger inferences from the general direction of travel and how this will impact big things like rates.

Right now the UK consumer looks okay-ish. The Bank of England (BoE) for one will be watching closely though, especially in the aftermath of the Budget.

Any perceived pressure from fiscal policy could lead to a monetary loosening in order to compensate and relieve both businesses and households and therefore the economy. This in turn could be good for markets, but only if the economy isn’t in a full-on freefall.

What else is coming up in November?

As for the rest of the month, we’ve got a BoE interest rate decision on 7 November.

ONS UK monthly unemployment figures are on 12 November while monthly and quarterly GDP falls on 15 November.

Finally, ONS monthly inflation figures are on 20 November.