1. icarus said...

The numbers relating to the jump in retail sales in May are volume sales. This means that the comparison between any two points in time is measured by nominal sales with a CPI deflator. If the sales volume increases over the year by 3.5% and CPI is 3.5% then nominal sales would have have increased by 7%. What's happened is that CPI vastly understates "shopping bag" inflation because it includes lots of things (transport, hotels, restaurant sales) that don't go into shopping bags. So we spend 7% more £s on our shopping while "shopping bag" inflation is 10% or more. So real sales volume is down by 3+% This is, we buy 3+% fewer Mars bars, apples, shoes and big plasma TVs.
So the headlines about the shock boost to retail sales in May are a bit like the Mad Hatter explaining to Alice that if the stockmarket is at 600 then rises to 900 you make a 50% gain. If it drops to 600 again you make a 33% loss, and so you make a 17% gain over the cycle.
"My head hurts, I think I'll lie down", says Alice. "Nonsense", says the queen, "it's time for a game of cards. My pack, my rules".