Shoppers gear up for Christmas, reports CBI

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Ian McCafferty: sales growth held up well in November

Shoppers are gearing up for Christmas in the UK with sales on the high street higher in November than a year ago and for the fifth consecutive month, according to the CBI’s latest quarterly Distributive Trades survey.

It revealed 55% of retailers saw the volume of sales rise in the two weeks to 10 November, while 13% said they fell. The resulting rounded balance of +43% was in line with expectations, and an improvement on October’s balance of +36%, said the CBI. However, a net 6% of retailers said sales in November were below average for the time of year.

Sales grew most strongly in November for grocers and clothing retailers. The three-monthly moving average of sales volumes, which smoothes out monthly peaks and troughs, edged higher to a balance of +43%, reports the CBI.

Looking ahead to the crucial pre-Christmas period, retailers expect strong sales volume growth to continue in December (+45%), and a net 11% of retailers expect the overall business situation to improve over the next three months.

After extremely sharp cuts to investment spending during 2008-2009, for a second quarter running, retailers are planning to invest more over the next 12 months, compared to last year (+28%), the CBI reports.

Ian McCafferty, CBI chief economic adviser, said: “High street sales growth held up well in November, and retailers are hopeful that the run-up to Christmas will be just as strong.

“However, looking into the New Year, retail sales growth may lose some of its sparkle, as consumers rein in spending after Christmas.

“Confidence remains fragile, VAT is rising in January, and a combination of weak wage growth and high inflation is eating into household incomes.”

Price inflation remains high with 51% of retailers saying average selling prices rose on a year ago, and 6% saying they fell. That gives a balance of +45%, compared to +58% in the August quarter. Prices are expected to rise at a similar pace in December (+42%). Numbers employed in the retail sector fell only slightly in the year to November (-5%).

Looking at the wholesaling sector, sales volumes rose in November compared with a year ago, with sales of clothing, textiles and footwear, and industrial materials among the best performers. Of those wholesalers responding, 41% reported a rise in sales volumes, and 20% a fall. That gives a rounded balance of +20%, which was better than expected (+3%), and an improvement on October’s lacklustre performance (+3%). Sales growth is expected to be flat in December. Employment continued to fall among wholesalers (-24%), and they are scaling back investment (-18%). Sentiment about the general business situation over the coming quarter has also weakened (-13%).

In the motor trades, sales volumes fell sharply in November, compared to a year ago. The balance of -48% was worse than expected (+13%), and the weakest balance since July 2009 (-76%). Sales volumes are expected to fall again next month (-37%). Employment is little changed (-2%), but investment intentions weakened (-27%) after positive readings in the previous two quarters.