WIREDGOV

RETAIL SALES GROW AT THEIR FASTEST PACE SINCE DECEMBER 2022

Retail sales grew at their fastest pace since December 2022 in the year to May, according to the latest CBI Distributive Trades Survey. Furthermore, selling price inflation in the retail sector eased considerably in May, to its lowest since August 2020. 

Looking ahead, retailers expect sales to fall slightly next month, but to remain broadly in line with seasonal norms. Conditions elsewhere in the sector also appear to be more mixed, with headcount continuing to fall and investment plans weakening further.

Key findings included:

• Retail sales volumes grew modestly in the year to May (weighted balance of +8% from -44%), at the fastest pace since December 2022. However, retailers expect sales to fall moderately next month (-4%).
• Sales were seen as “average” for the time of year (+2%), which was the firmest outturn in eight months. Sales are expected to remain broadly in line with seasonal norms in June (+1%).
• Orders placed upon suppliers declined moderately in the year to May (-11% from -49%). Retailers expect the cutback in orders to continue next month, at a slightly faster rate (-16%).
• Stocks relative to expected sales (+16%) were close to the long-run average (+17%) and are expected to remain at a similar level (+16%) next month.
• Selling price inflation eased considerably (+20% vs +54% in February), now at its lowest since August 2020 and having fallen back below its long-run average. Prices are expected to continue to increase at only a slightly faster pace next month (+30%).
• However, retail employment continued to decline for the seventh consecutive quarter (-26%). Headcount in retail is expected to continue to contract next month, but at a more moderate pace (-18%).
• Retailers’ investment intentions for the year ahead have also deteriorated (-25%, from -9% in February). 
• Retailers are broadly neutral about their business situation over the coming quarter (+2% from +6% in February), after having been slightly more optimistic over the last couple of surveys.

Alpesh Paleja, CBI Lead Economist, yesterday said:

“May’s increase in retail sales adds to the swathe of data pointing to an improvement in activity over the near-term. Falling inflation, and continuing real wage growth will contribute to a healthier consumer outlook, in turn supporting the retail sector further. 

“That being said, retailers are restrained about their business situation over the coming quarter. Headlines sales are expected to fall moderately next month, and it’s concerning that retailers’ investment intentions have deteriorated noticeably. 

“The mixed mood from our survey demonstrates just how nascent the economic recovery is. All parties should use this general election campaign to embrace policies which will embed sustainable growth, foster the investment we need to develop a labour market which delivers higher living standards, and to accelerate our transition to net zero.”

The survey included 137 respondents, of which 56 were retailers.