Could the latest Call of Duty: Advanced Warfare (COD) really help the UK economic recovery with its retail sales figures? Apparently so… the UK Consumer Price Index (CPI) recently increased by an unexpected 0.1% – a factor attributed to video game sales. The Bank of England (BOE) recently stated that UK inflation was likely to drop in the coming six months, possibly below 1%. However, with such favourable inflation figures coming to light, it seems UK gamers and the COD Advanced Warfare sales have helped boost the economy.
Although nations are recovering from the global financial crisis of 2008, the state of global and local economic climates is still a hot topic of discussion. From economists measuring the rate of recovery to people in casual situations chatting about finding work – the economic outlook is always being debated. We all want our economies to perform to their best ability so that our quality of living is at the highest standard it can be.
So, how do we monitor how well an economy’s performing? For most large economies there are a number of sectors that are closely monitored in order to determine how well it’s functioning. These sectors include industrial and manufacturing production, services, imports, exports, consumer prices and retail sales. Economists’ make forecasts for how well the nation should be performing and estimate what it’s likely to achieve.
Economic Data Can Cause Pound Sterling (GBP) Exchange Rate Movement
Retail sales figures gauge how much consumers are spending and is a good indication of consumer confidence levels. When confidence in the economic climate is high, consumers feel they can spend more rather than save. Furthermore, commodity values can also affect confidence and retail sales. The Canadian Dollar (CAD) recently fell when the price of oil (Canada’s largest export) dropped. The Canadian Dollar exchange rate dipped when Saudi Arabia stated that it was going to cut fuel oil costs due to the recent global surplus. As a commodity currency, the ‘Loonie’s’ value is closely linked to the cost of oil. However, the recent fall in gasoline prices in the US caused a splurge in spending amongst citizens.
As a result of the higher spending and increased confidence, the US Dollar (USD) exchange rate rallied against other currency majors such as the Pound (USD/GBP), Canadian Dollar (USD/CAD), Euro (USD/EUR), Australian Dollar (USD/AUD) and New Zealand Dollar (USD/NZD).
The Rise of Call of Duty and the Popularity of Video Games
This article will focus on computer games as an example of a popular phenomenon that can affect retail sales figures. Call of Duty is one of the most popular videogames of all time. In fact, it’s the best-selling first-person shooter franchise in the entire history of gaming. Spanning across the Xbox, Playstation, PC and even handheld console platforms, the volume of sales on the release of the game can be outstanding.
The franchise began in 2003 on the PC and has sold 188,900,000 units as of July 2014, (bearing in mind this excludes the latest COD – Advanced Warfare released just this month.) Furthermore, Activision (the company that created the game) is expecting it to be the best selling version of the first-person shooter of all time. Advanced Warfare is currently the fifth fastest-selling COD ever out of a total of 21 titles.
Call of Duty Advanced Warfare to Outperform Previous Retail Sales?
We’re yet to discover whether Call of Duty Advanced Warfare has broken sales records as Activision is still to divulge the information; however, they have stated that sales are up on a yearly basis. Activision said: ‘We are very happy with how much fans have embraced Call of Duty: Advanced Warfare as evidenced by an increase in combined retail and digital sales year-over-year in the UK. While it’s still early, we think we have a great game that’s fun, engaging, and will keep people playing for some time to come. Welcome to a new era of Call of Duty.’
How Many Pounds (GBP) do Call of Duty Games Make in Retail Sales?
So let’s think about this in financial terms; if each game costs approximately £50, and the previous Call of Duty game, Ghosts, sold 20 million copies in the fourth quarter of 2013, that equates to £100 million. Bearing in mind this doesn’t include any add-ons the game offers. For instance, many people bough the Season Pass that was introduced a few games ago which includes map packs costing around £34.99. And there are other add-ons ranging from low prices of £1 up to the most expensive Season Pass. Furthermore, this is the first Call of Duty launch to be released on next generation consoles such as the Xbox One and Playstation 4; that’s increasing the console outreach by two. Let’s not also forget that some COD releases have seen special editions which have retailed at up to £150.
So let’s bring it back to retail sales and how they’re used to measure the economy. Retail sales figures get a lot of focus from economists and investors as it’s a way of understanding how consumers feel about the economy. Volatile components can be removed from the figures, for example, the increased splurging at Christmas time. Figures are published in both non-seasonally adjusted and seasonally adjusted form to gauge the amount of sales in both respects. To adjust the data economists use an adjusted annual rate for the month which is used to measure how well sales are actually doing.
Bank of England (BoE) Interest Rate Decision Dependent on Upbeat UK Data
Retail sales can also be used by the Bank of England (BoE) when it makes decisions about monetary policy. The Monetary Policy Committee [MPC] decides the interest rate in the UK which in itself is enough to cause the Pound to fluctuate. Talk on increasing borrowing costs can boost consumer confidence as well as encouraging the Sterling exchange rate to rise against other currency majors.
Retail sales can show a lot about the economy and can in itself move the Pound (GBP) exchange rate quite significantly. It is also important to note that seasonally adjusted figures can help create a more accurate vision of the economy as it stands. However, popular releases of items such as iPhones, Call of Duty and books such as the Harry Potter series (which were all released annually) can cause a surge in retail sales, all of which can help the economy grow and boost confidence.
As discussed at the beginning of the article, commodity values can alter exchange rates, as can retail sales. The lower price of oil is likely to have a longer lasting effect on the economy, whereas retail sales can see a spike which can make trends difficult to detect. This year we are yet to see the effect Call of Duty has had on UK retail sales figures; however, if the past is anything to go by, the popularity of the game seems to be increasing. UK gamers and retailers embrace the game and the launch with midnight openings—an event that wouldn’t happen if retailers couldn’t make a decent profit.
Futhermore, the game has sold so many copies economists’ believe that UK inflation has risen as a result. UK inflation rose by 0.1% in October, despite forecasts to stagnate at 0.0%. Popular items such as iPhones and best-selling video games do have the ability to increase sales and therefore inflation which can boost the Pound (GBP) exchange rate as a result.
