CBI: Retail sales fall in the year to August 2017

Retail sales declined in the year to August, disappointing expectations that growth would hold broadly steady, according to the latest quarterly CBI Distributive Trades Survey.

The survey of 117 firms, of which 57 were retailers, showed that, in the year to August, the volume of sales fell at the fastest pace since July 2016, with orders placed on suppliers also falling considerably year-on-year. Overall, sales for the time of year were considered to be below seasonal norms to the greatest extent since October 2014. 

Looking ahead to next month, retailers expect sales volumes to rebound in the year to September, while orders are expected to stabilise. 

Within the retail sector, grocers saw stable sales on the year, following strong growth last month, and footwear and leather performed well, whilst specialist food & drink stores reported another month of significantly falling sales. 

Year-on-year internet sales growth slowed, edging further below the long-run average, but growth is expected to pick up next month.

Meanwhile, wholesaling saw growth in sales volumes slow in the year to August, while motor trades reported sales rising on a year ago, but at a pace below expectations. Both retailers and wholesalers anticipate firm sales growth in the year to September. 

The quarterly survey showed that employment declined in the retail sector in the year to August, at the fastest pace since August 2009, with a similar reduction in headcount expected next month. Retailers expect the business situation to continue to deteriorate over the next three months for the third quarter in a row. Nevertheless, investment intentions for the year ahead were mildly positive following two quarters of contraction. Meanwhile, average selling prices continued to rise strongly, although at a somewhat slower pace in the year to August.

Anna Leach, CBI Head of Economic Intelligence, said:

“Despite the warmer weather at the start of the month, retail sales have cooled as higher inflation continues to squeeze consumers’ pockets. Meanwhile, deteriorating sentiment regarding the business situation has combined with falling headcount among retailers.

“Looking ahead, firms do expect sales growth to recover, but the pressures on household budgets are set to persist, given little sign of wages picking up.”

Key findings

Retailers:

• 34% of retailers said that sales volumes were up in August on a year ago, whilst 44% said they were down, giving a balance of -10% - the lowest since July 2016 (-14%). This was below expectations (+20%) and below July’s performance (+22%)
• 35% of respondents expect sales volumes to increase next month, with 16% expecting a decrease, giving a balance of +19%
• 17% of retailers placed more orders with suppliers than they did a year ago, whilst 41% placed fewer orders, giving a balance of -24%. Orders are expected to fall at a slower pace next month (-4%)
• 11% of retailers reported that their volume of sales for the time of year were good, whilst 21% said they were poor, giving a balance of -10%
• Internet sales volumes continued to expand in the year to August, but at a slower pace (+34%, compared with +43% in July), edging further below the long-run average (+48%)
• Sales volumes were broadly flat among grocers (-3%) and dropped in specialist food & drink (-57%), while sales of other normal goods (+45%), hardware & DIY (+45%) and footwear and leather (+100%) grew strongly 
• Employment declined further in the retail sector in the year to August (-35%), with a broadly similar reduction in headcount expected over the next quarter (-33%)
• Retailers expect the overall business situation to continue to deteriorate over the next three months (-8%)
• Investment intentions for the next year compared to the previous twelve months turned mildly positive (+6%, compared with -9% in the previous quarter), following two consecutive quarters of negative figures
• Average selling prices continued to rise strongly (+54%) with prices set to rise at a broadly similar pace in the year to September.

Wholesalers:

• 44% of wholesalers reported sales volumes to be up on last year, and 31% said they were down, giving a rounded balance of +14%, underperforming expectations (+23%). Volumes are expected to grow at a quicker pace next month (+28%).

Motor traders:

• 40% of motor traders reported sales volumes were up on a year ago, whilst 27% said they were down, giving a balance of +13%. This was below expectations (+26%), but growth is expected to pick again next month (+31%).