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Retailers report surprise dip in sales growth - CBI survey

Retail sales were broadly flat in the year to February and orders placed upon suppliers fell, according to the CBI’s latest quarterly Distributive Trades Survey.

The survey of 138 firms including 62 retailers showed that both volume of retail sales and orders failed to meet expectations of growth in February, following six months of very buoyant sales. While firms remain optimistic that volumes will grow in March, expectations have moderated significantly from recent highs.

Investment intentions for the year ahead were negative in contrast to the last few months, while employment fell on a year ago. Notably, average selling prices fell for the first time since May 2006, with only a slight rise expected next month.

While sales volumes rose particularly strongly for cultural goods and chemists, this was offset by poorer performances elsewhere – particularly among grocers and department stores.

However, despite the fall in sales, prices and headcount, retailers still expect a moderate improvement in their business situation over the next three months.

Rain Newton-Smith, CBI Director of Economics said:

“After a strong start to the year, retailers were disappointed by the unexpected halt in sales growth. In particular, continually heavy discounting in the grocers sector seems to be weighing on activity.

“Looking ahead, the outlook for the retail sector is fairly positive, with the boost to household incomes from falling inflation likely to support spending. Indeed, firms remain upbeat about the businesses situation over the coming quarter.

“However, as this survey shows, overall trading conditions on the high street remain challenging.”

Retailers

Key findings:

  • 30% of respondents reported that sales volumes were up on a year ago, while 29% said they were down, giving a balance of +1%, significantly below expectations (+42%) and the lowest since November 2013 (+1%)
  • Retailers expect sales volumes to grow next month (+27%), with 44% expecting them to rise and 17% to fall
  • Some sub-sectors saw growth in sales volumes, with cultural goods (+67%), and chemists (+67%) leading the way. But grocers' sales fell on a year ago (-20%), as did those of non-specialised stores (-54%) and clothing (-9%)
  • The volume of orders placed upon suppliers fell (-7%), disappointing expectations of growth (+12%), but firms do anticipate a rise next month (+18%)
  • Stocks relative to expected demand (+20) were broadly in line with expectations. Stock adequacy is expected to ease back slightly in March (+13%).
  • Volumes of sales for the time of year in February fell below seasonal norms (-5%), to the greatest extent since January 2014.
  • Retailers expect their overall business situation to improve over the next three months (+11%)
  • Intentions to invest over the next twelve months compared to the previous twelve were negative (-11%), for the first time since August 2013 (-14%).
  • The volume of internet sales rose (+47%) at a pace broadly in line with expectations (+49%)
  • Average selling prices fell (-9%), for the first time since May 2006 (-4%)
  • Employment fell on a year ago (-21%), with a broadly similar fall in headcount expected next month (-19%).

Wholesalers

55% of wholesalers reported sales volumes to be up on last year and 7% said they were down, giving a balance of +48%. The growth in employment was a record high (+52%) and expectations for growth in March (+48%) were the highest since February 2007 (+50%).

Motor traders

38% of motor traders reported sales volumes to be up on last year and 32% said they were down, leaving a rounded balance of +7% - the slowest sales growth in five months. Investment intentions for the year ahead turned positive (+22%) for the first time in a year.

Notes to editors:

  1. Firms responding to the Distributive Trades Survey (DTS) are responsible for a third of employment in retailing. The survey includes measures of sales activity across the distributive trades. It was first introduced in 1983 and the retail results form the UK component of the EC survey of retail trades.
  2. The survey was conducted between 29th January and 13th February. 138 firms took part, of which 62 were retailers, 62 were wholesalers and 14 motor traders.
  3. A balance is the difference between the percentage of retailers reporting an increase and those reporting a decrease.
  4. Across the UK, the CBI speaks on behalf of 190,000 businesses of all sizes and sectors which together employ nearly 7 million people, about one third of the private sector-employed workforce. With offices in the UK as well as representation in Brussels, Washington, Beijing and Delhi, the CBI communicates the British business voice around the world.

 

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