By Daniel Hunter

Sales on the UK high street were flat in August compared to a year ago, broadly in line with retailers’ expectations, but sentiment about the business situation deteriorated sharply.

In the CBI’s latest quarterly Distributive Trades Survey, conducted over the first two weeks of August, 27% of retailers reported an increase in their volume of sales compared to a year ago, while 31% said they had seen a fall. The resulting rounded balance of -3% was broadly in line with expectations of +3%. Sales volumes also fell further below the average for the time of year (-27%).

Twelve of the thirteen retailing sub-sectors saw a slowdown in the pace of year-on-year sales growth this month. Only the footwear & leather sub-sector bucked the trend with a modest acceleration in growth to +58% from +42% in July.

In line with the weakening in sales growth, orders placed by retailers with suppliers were down when compared with the previous year (-11%), falling at their fastest rate since January 2012.

Elsewhere, year-on-year shop price inflation fell back considerably (+31%), and is now at its lowest since November 2009 (+17%). Retailers expect to raise prices at a similar year-on-year rate next month (+32%).

The number of people employed in the retail sector was down on a year ago (-25%), following a rise in the previous quarter. Retailers expect to reduce headcount further in the coming month (-12%). Furthermore, investment intentions for the year ahead remained negative (-13% is below the long-run average of 0%), but were less negative than at the turn of this year.

But looking ahead, sales are expected to rise slightly on a year ago next month (+6%), and to be slightly stronger compared to seasonal norms (-15%).

Nonetheless, with a balance of -17%, retailers expect the business situation to deteriorate over the next three months, with sentiment weakening more than at any time since February 2009 (-26%).

“Although this summer’s events created a mood of celebration across the nation, these figures would suggest this positivity did not extend to the high street," Judith McKenna, Chair of the CBI Distributive Trades Panel and ASDA Chief Operating Officer, said.

“However, although retailers expect the overall business situation to worsen in the coming three months, they still expect sales to rise year-on-year in September.”

In the wholesale sector, both the volume of sales (-32%), and orders placed upon suppliers (-42%) fell sharply, with both results failing to meet expectations (+8% and +1% respectively). Further falls in sales volumes (-29%) and orders (-23%) are expected in September.

In motor trades, sales volumes fell (-10%) as expected (-11%), though firms expect sales to grow slightly in September (+4%).

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