Today a BBC Business News article proudly states that ‘Retail Sales Fall Unexpectedly In January‘.
The Beeb cite a report by the ONS again released today showing retail sales volumes dropping by 0.3% as compared with the previous month, well below the 0.9% expected rise.
I don’t know if it’s the way mainstream financial writers come up with headlines or in this particular case whether the writer – who remains nameless – is just regurgitating statistical information.
What I have issue with is the headline itself and specifically the word ‘unexpectedly’ especially when you consider these posts:
- Whoopsie: Next Plc (LSE: NXT) Says The Future Looks Bleak
- Shock Horror: The US High Street Is Also Feeling The Pinch
The point here is that if you are the type of investor that takes the time to read what the large cap retailers are saying about the high street then you are much more likely to get closer to an approximation of what he future will actually hold for the high street.
After all these are the boys and girls who count the retail numbers day in and day out; they are out there plying their trade and have been doing so for a very long time.
There was nothing unexpected about retail volumes declining in January and in fact when you understand just where the expectation came from (see below) you’ll understand how the mainstream financial press can misalign your investment framework if you allow it.
Economists’ forecasts came from a Reuters poll which forecasted a 0.9% increase and no forecaster had expected a fall.
It is well known that economists are well well behind the curve when it comes to framing how we as investors view macro economic trends.
It is worse with forecasters who routinely get it wrong.
It is one of the reasons why I use the trailing twelve months and the last 3, 5 and 10 years worth of earnings to calculate the PE Ratio unlike some who will use ‘forward’ earnings (forecasting what a company will earn in the future).
The BBC are not the only ones to blame since this headline or something similar today is all over the mainstream financial interweb.
In any event the consensus among economists and forecasters seems to be that higher inflation leading to a squeeze on the rise of real incomes is to blame for a slowdown in consumer spending, echoing the statement made by Next Plc (LSE: NXT) in early January.
Today’s takeaway: read the RNS statements of large cap retailers to find out what the economic reality actually is on the UK high street, they are much more likely to be right than wrong.