By Max Clarke

Year-on-year sales on the high street was lower than forecast for July, as food and fuel inflation continue to erode the disposable incomes of UK consumers.

These are the findings of the CBI’s latest Distributive Trades Survey, conducted between 28 June and 19 July. It revealed that 33% of retailers saw sales volumes rise on a year ago, while 38% reported a fall. The resulting balance of -5% was the weakest since June 2010 (a balance of -5%) and disappointed retailers’ expectations. It continued the weakness seen in the June survey (-2%).

“Rising prices, especially for fuel, continue to impact consumer confidence and make life tough on the high street,” commented Judith McKenna, Chair of the CBI Distributive Trades Panel and ASDA Chief Operating Officer.

“There's been a fall in real disposable incomes since the beginning of the year with shoppers either cutting back or trading down to make their declining spending power go further.

The survey results come on the same day that the British Retail Consortium revealed a 0.4% drop in employment in the retail sector, further evidencing the troubles faced across the UK’s high streets.

The three-month moving average of sales volumes, which smoothes out monthly peaks and troughs, weakened to +4%, compared with +12% in June.

Sales were reported to be poor for the time of year, driven by the first fall in grocers’ sales volumes in 30 months (-20%). Sales of footwear & leather (-84%), durable household goods (-76%) and hardware & DIY (-62%) also fell sharply.

Retailers expect sales volumes to fall at a faster rate next month (-12%).

The volume of orders placed by retailers upon suppliers fell (-13%) at the fastest rate since May 2010 (-24%), and a similar decline is expected next month (-17%). The volume of stocks in relation to expected demand (+17%) is hovering around the long-run average (+18%).

Among wholesalers, 44% reported a rise in the volume of sales in July and 15% a fall, giving a balance of +28%. Among motor traders, 23% saw the volume of sales increase, while 62% reported a fall, giving a balance of -39%, and sales are expected to fall again next month (-30%).

“With consumer confidence fragile, UK retailers continue to face challenging times,” concluded McKenna.

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