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Retail Sales Climb Across Globe, But How Long Can it Continue?

August retail sales data in the U.K., China and U.S. this week showed continued improvement, but retailers have good reason to remain cautious about this encouraging trajectory.

That’s because there’s still so much uncertainty over what the Covid-19 pandemic will do next and whether global supply chains that haven’t yet recovered from the outbreak can withstand round two. Industry watchers are also keeping an eye on jobs data and what unemployment figures mean for discretionary spending.

U.K. retail sales

U.K.’s Office for National Statistics on Friday said that retail sales volumes rose for the fourth consecutive month, notching a 0.8 percent gain when compared with July and representing a 4.0 percent increase when compared with February’s pre-pandemic level.

However, within the retail distribution channel, August sales were mixed. Non-store retail volumes were 38.9 percent above February, while apparel stores were still 15.9 percent below February’s pre-pandemic levels. And drilling down a little further, online retail sales fell 2.5 percent in August, when compared with the month prior. However, the strong rise in growth during the pandemic meant that online sales were still 46.8 percent higher than February’s pre-Covid levels.

The report also detailed foot traffic trends in the month’s final two weeks covering Aug. 10-23. The highest percentage of businesses reporting decreased foot traffic were textile, apparel and footwear stores at 85.7 percent.

China retail sales

Retail sales in China saw 0.5 percent growth year-over-year, moving into a positive rate of growth for the first time this year, the National Bureau of Statistics of China said on Tuesday, as month-to-month growth reached 1.25 percent.

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On a year-over-year basis, retail sales in urban areas rose 0.5 percent, while those in rural areas were up 0.7 percent. General retail sales of goods were up 1.5 percent, while sales of communication equipment rose 25.1 percent and that of automobiles were up 11.8 percent. In addition, national online retail sales for the first eight months were up by 9.5 percent year-over-year.

U.S. retail sales

U.S. retail sales in August rose 0.6 percent, missing economists’ 1 percent consensus estimate. The increase was still 2.6 percent above August of last year, and it represented the fourth straight gain in retail sales since April, when the Covid outbreak hit America’s shores and stores.

August also saw some shifts in spending, mostly due to uncertainty over whether or not schools would reopen for in-class instruction, which delayed the start of the back-to-school selling season.

What’s ahead

China’s industrial production rose 5.6 percent, indicating a recovery in supply chains hit hard when the outbreak began in Wuhan. But countries importing Asian goods had already started shifting production elsewhere, even before Covid hit, mostly due to rising employment costs in China and then the disruption caused by the pandemic. Some apparel firms have begun re-thinking off-shore production moving sourcing closer to end markets, which could help to optimize shipping and logistics. If that happens, eventually China will have to hope domestic demand catches up with production to offset the loss of orders from foreign firms.

The issues for the U.K. are more similar to those in the U.S. for apparel retailers, with online sales expected to grow even higher as consumers continue to spend more in e-commerce. And while retailers continue to make shopping safe in their stores, those added costs probably won’t be offset by in-store sales.

In fact, major shippers and e-commerce platforms such as Amazon are already hiring to prepare for the onslaught of digital orders. And new data from ShipStation shows that 63 percent of Americans plan to do all of their holiday shopping online, including Black Friday purchases.