CBI: high street sales growth set to remain sluggish

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Annual sales volumes growth on the high street remained subdued in May and retailers expect a similar pace of growth next month, the CBI said today. Meanwhile, price inflation has weakened slightly, but still remains very high.

The CBI’s latest quarterly Distributive Trades survey found 41% of retailers saw the volume of sales rise in the two weeks to May 16th, while 23% said they fell, compared with a year ago. The resulting balance of +18% was above expectations that sales would be flat (-1%), but broadly in line with more muted sales growth since February.

Price inflation on the high-street remained rapid in May, with 71% of retailers saying average selling prices rose on a year ago, and 8% saying they fell, giving a balance of +63%. Prices are expected to rise at a similar pace in June (+62%).

Continued subdued sales growth resulted in an increase the quantity of stocks relative to expected demand this month (+31%), the highest since November 1984 (+33%). Retailers expect stocks to remain at high levels in June (+25%).

The volume of sales growth for the time of year was better than expected, -2% compared to the -18% predicted last month, possibly due to the positive knock-on effect of the Royal Wedding weekend.

There was some modest growth in orders volumes in May on a year ago (+6%) against expectations of a slight fall (-4%). However, orders are expected to stagnate next month (-2%).

Looking forward, retailers expect growth to continue at a similar subdued pace next month, with 35% predicting sales will rise and 21% saying they will decline, giving a balance of +14%.

Retailers expect investment to be stable over the next 12 months (-2% compared to +14% in February). This mirrored the sentiment about the business situation over the next three months, which is broadly neutral (-2%).

John Cridland, CBI director-general, said: “High-street sales growth is subdued and is likely to remain sluggish for some time.

“Household budgets are being persistently squeezed by the gap between price inflation and weak wage growth.

“Given these challenging consumer conditions, it is good news retail sales growth is stable, not falling.”

Judith McKenna, chair of the CBI Distributive Trades Panel and Asda chief financial officer, said: “Family spending power is at a very low level, and with the continuing bite of rising utilities and fuel, we are not likely to see an improvement in this situation anytime soon.

“Consumers will be focusing on getting value for every one of their hard-earned pounds, so it’s crucial that retailers make their prices as competitive as possible.”

Sales trends were weaker across most retail sectors this month.

Durable household goods (-59%) and furniture and carpets (-23%) both performed badly, the latter being negative for the first time in almost a year.

The grocery and footwear and leather sectors performed well in May, with strong volume of sales growth on a year ago indicated by balances of +67% and +82% respectively, compared to balances of +53% and +23% last month.

Employment in the retail sector continues to be down on a year ago (-6%), with the jobs situation expected to be little changed next month (-3%).

The wholesaling sector shrugged off a slowing in sales growth last month, with a balance of +35% reporting that sales volumes are up on a year ago in May, compared to +13% in April. The balance of wholesalers who saw an increase in orders rose (+41%), the strongest since May 2008 (+41%). At the same time a balance of +78% of firms said that prices had increased, representing the fastest rise since February 1990 (+83%).

In motor trades, 32% of companies said the volume of sales had increased on a year ago, while 42% said they had decreased giving a balance of -10%, up from -17% in April. The outlook is similar for next month (-14%).