CBI: decline in high street sales accelerates in UK

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Retail sales volumes fell in August 2011 at the fastest pace for over a year, the CBI said today.

Retailers also have the most negative outlook on the general business situation than they have had since February 2009.

The CBI’s latest quarterly Distributive Trades Survey found 31% of retailers saw the volume of sales rise in the two weeks to 16 August, while 46% said they fell. The resulting rounded balance of -14% was in line with expectations (-12%), and the most negative since May 2010 (-18%).

Price inflation on the high street remains above average but +55% is the lowest balance since November 2010 (+45%). The continued rise in average prices isn’t expected to slow much in the coming month, the CBI said.

A balance of -11% of retailers said they felt more negative about the business situation over the next three months than they did three months ago, the most negative for 18 months.

Sales growth for the time of year was not considered quite as bad as had been expected, with a balance of -28% compared with -37%, the CBI reported. However, the volume of orders placed with suppliers fell (-22%) at the fastest pace since May 2010 (-24%). Orders are expected to fall again next month (-11%).

Looking ahead, retailers expect the volume of sales to fall again in the year to September 2011, but at a slightly slower pace; with 27% expecting a rise and 35% predicting a fall, giving a balance of -7%.

Retailers are scaling back investment plans over the next 12 months, with the balance of -11% the most negative since February 2009 (-26%), said the CBI.

Judith McKenna, chair of the CBI Distributive Trades Panel and Asda chief operating officer, said: “As expected, August was a tough month on the high street. Sales volumes fell at a pace not seen in over a year, as consumers have continued to see their real incomes squeezed by a combination of inflation and weak wage growth.

“This survey suggests prices will rise more slowly in the coming months, and savvy retailers will continue to offer consumers the lowest prices possible, but with energy and commodity costs still high, families’ spending power looks like being constrained for some time.”

There was a mixed picture across the retail sectors in August 2011. Grocers reported a modest increase (+11%), having seen sales fall in July (-16%) for the first time in nearly three years. Clothing retailers’ sales fell (-27%), with the lowest balance recorded since August 2009 (-35%), while sales of footwear and leather rose (+38%) for the first time since May 2011.

For the third month running, both durable household goods (a balance of -76%) and hardware and DIY (-50%) sectors performed badly, whereas the furniture and carpets sector (+39%) saw sales rise for the third month in a row.

Employment in the retail sector was down slightly again (-7%) on a year ago, although expectations for the next three months (-1%) are the least negative since February 2004 (+2%).

Wholesalers reported a fall in sales volumes (-10%). The three-month moving average, which smoothes out volatility, is at its lowest level (-1%) since March 2010 (-13%) and is expected to remain at a similar level next month (+2%), the CBI said. Wholesalers’ stocks are running at the highest volume in relation to demand (+35%) since December 2009, and average selling prices are expected to rise in the next three months by the weakest balance (+41%) since May last year.

In motor trades, the lowest balance (-66%) since July 2009 (-76%) said the volume of sales fell on a year ago in August. Sales are expected to continue falling in September 2011. Volumes of orders placed with suppliers fell at the fastest pace since July 2009.