By Claire West

Volumes of sales on the high street were higher than a year ago in August, the second consecutive year-on-year increase, according to the latest CBI quarterly Distributive Trades Survey.

Retailers expect sales to continue growing in September and they are more optimistic about the general business situation in the coming three months.

Over half of the retailers surveyed (53%) said that the volume of sales rose during the first two weeks in August while 18% said that it fell, giving a balance of +35%. This was similar to the pace of sales growth in July (+33%), and the fastest since April 2007, though it was slower than expected (+45%).

Sub-sectors seeing the strongest growth were: clothing, grocers, durable household goods, footwear & leather, and hardware & DIY.

Better weather at the beginning of August, the summer sales and summer holidays are likely to have helped drive sales up in these sectors, the leading business group said.

The balance for the underlying trend, the three-monthly moving average of sales volumes, was +21%, which is the strongest figure since July 2007 (+22%).

Looking to September, retailers expect sales growth to remain strong, with a balance of +39% expecting volumes to be higher than a year ago.

The August Distributive Trades Survey was conducted between 27 July and 11 August, and covered 133 companies.

Numbers employed in the retail sector were broadly unchanged in the year to August, the first time since February 2004 a fall in employment hasn’t been recorded in the longer, quarterly survey.

For the third quarter running, price inflation has accelerated. In this survey, 66% of firms said average selling prices rose on a year ago, and 9% said they fell, giving a rounded balance of +58%. This is the fastest pace of price increases since February 1992 (66%).

Reflecting the recent run of better retail sales, a net 22% of firms expect the overall business situation will improve in the coming three months, with sentiment at its most positive since May 2004 (+22%).

Furthermore, for the first time in six years, retailers expect to invest more in the coming year than in the last one. With a balance of +32%, firms’ investment intentions are the most positive since February 1994 (+40%).

Lai Wah Co, CBI Head of Economic Analysis, said:

“Better sales growth continued on the high street in early August, and retailers are upbeat about prospects in the coming three months. The summer sales, some warmer weather and the school holidays will no doubt have helped, lifting sales of clothing and shoes and encouraging households to invest in some home improvements.

“Retailers are hopeful that strong sales growth will continue next month. However, the broader outlook for consumer spending is still uncertain, given the VAT rise next year, subdued pay awards and the feed-through of public spending cuts to job losses.”

In wholesaling, sales volumes rose in August compared with a year ago, despite expectations they would fall. 41% of wholesalers said the volume of trade was up, while 18% said it was down, giving a balance of +23%. This was far better than the -18% figure expected last month, and a similar growth in volume of sales is predicted in September (+22%). The best performing wholesale sectors mirror those in retail; namely, clothing and food & drink.

In the motor trades, sales volumes fell on a year ago for the third month running. The balance of -27% was slightly worse than expected (-23%), and another fall is expected next month (a balance of -21%).