By Daniel Hunter
Retail sales volumes rose strongly in May compared to a year ago, and sentiment regarding the business situation for the next quarter has improved. But sales were still reported to be below average for the time of year.
The Confederation of British Industry's (CBI’s) latest quarterly Distributive Trades Survey, conducted over the first two weeks of May, shows that 43% of retailers reported an increase in their volume of sales compared to a year ago, and 23% said they had seen a fall. The resulting rounded balance of +21% was broadly in line with expectations (+19%).
Sentiment regarding the business situation for the next three months has also turned positive (+3%) for the first time since November 2011 (+11).
However, retailers reported that sales were below average for the time of the year (-19%). Despite the increase in sales volumes, stock levels rose unexpectedly relative to expected demand (+23%, compared with an expectation of +3%), with the survey balance now similar to that in March.
The majority of retail sectors saw sales increase, notably grocers (+40%), non-specialised (including department stores) (+65%) and furniture & carpets (+72%).
The number of people employed in the retail sector increased on a year ago (+12%), for the first time since February 2003 (+12%). In June retailers expect to continue recruiting more staff compared to a year ago (+7%).
Year-on-year price inflation in shops remained robust (+54%), but still below the peak seen at the beginning of 2011(+73%). Retailers expect this to remain at a similar level next month (+53%).
Looking ahead, retailers expect sales volumes to grow again on a year ago in June (+25%) and the business situation to be stable over the next three months (+3%), following expectations of a modest deterioration in recent quarters.
“It’s encouraging to see high-street sales up compared to a year ago, and that business sentiment about the next three months has improved," Judith McKenna, Chair of the CBI Distributive Trades Panel and ASDA Chief Operating Officer, said.
“However, sales are still below the average for the time of year and the combination of high unemployment, slow wage growth and weak consumer confidence means that the retail sector is likely to remain under pressure in the short term.”
In the wholesale sector, the volume of sales grew solidly (+36%) and the volume of orders placed upon suppliers also increased (+15%), with both results beating expectations (-9% and -12% respectively).
However in motor trades, sales volumes fell on a year ago (-22%), disappointing expectations of growth (+19%). The sector continued to expect a modest deterioration in the business situation for the next quarter (-8%).
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