Retail sales fall in October but Christmas uplift expected next month

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Retail sales fell in the year to October, at a similar pace to August and September, according to the latest CBI Monthly Distributive Trades Survey. 

Looking to next month, retailers do expect some very modest growth, the UK’s leading business organisation said.

A quarter (24%) of companies saw sales volumes rise on a year ago, while 36% reported a fall, giving a rounded balance of -11%. This was broadly the same as last month (a balance of -15%).

The volume of sales was poor for the time of the year (-34%), and was the lowest since May 2009 (-36%).  

Sales volumes in most sub-sectors declined: there were particularly rapid falls in footwear and leather (-98%), hardware and DIY (-75%) and clothing (-39%). But the grocery and furniture and carpets sectors saw their sales volumes increase on a year ago (+11% and +34% respectively), compared to (-3% and -59%) last month.

Looking ahead to next month, sales volumes are expected to increase very modestly (+4%).

Ian McCafferty, CBI chief economic adviser, said: “High street sales remain difficult but the decline has stabilised, and retailers expect there to be some very modest growth next month in the build-up to Christmas.

“Family budgets continue to be stretched because of a combination of high inflation, low wage growth and soaring unemployment, so consumer confidence is severely dented.

“High-street retailers are heavily discounting as they aim to provide the best possible value on basics, but consumers will continue on the back foot as real incomes remain squeezed.

“However, price pressures will likely ease next year as the impact of the VAT rise on inflation falls away.”

The volume of orders placed upon suppliers was broadly flat year-on-year (+1%), following a fall last month (-16%). The volume of stocks in relation to expected demand was stable (+15%) and is expected to be broadly the same next month (+12%).

Among wholesalers, 37% saw sales volumes increase, while 28% reported a decrease, giving a rounded balance of +10%, with -2% expected in November. Motor traders saw their tenth successive monthly decline in sales on a year ago (-55%).

Commenting on today’s CBI Distributive Trades data, Richard Lowe, head of retail & wholesale at Barclays Corporate, said: “Sales continue to slow but with Christmas fast approaching there is an air of optimism on the high street. 

“For retailers the next few months will all be about maintaining margins, encouraging consumers to do their Christmas shopping early and buy goods at full price rather than waiting for last minute mark downs and sales.”