Clothes rail retail

Retail sales volumes grew modestly in the year to February, having fallen in January, according to the latest CBI quarterly Distributive Trades Survey.

The survey of 128 firms, of which 64 were retailers, showed that sales volumes are expected to rise again in the year to March, albeit at a slightly slower pace.

However, the volume of orders placed upon suppliers fell over the year to February, having been stable last month, and a further decline is expected next month. Sales for the time of year remained broadly in line with seasonal norms in February - for a second consecutive month - following above-average sales in the final two months of 2016.

The slight increase in overall retail sales volumes was driven by the clothing and non-store sectors, as well as other normal goods. Year-on-year growth in internet sales volumes slowed although retailers expect them to pick up slightly next month. Overall, retailers appear to have become more cautious in their outlook. Employment fell at the fastest pace in two years, with a similar reduction in headcount expected next month. Investment intentions for the year ahead also turned negative, following a modest improvement over the previous two quarters.

Meanwhile, for the first time in four-and-a-half years, retailers expect their business situation to deteriorate over the next three months. The most significant factor driving this more pessimistic outlook was rising cost pressures.

Higher costs are feeding through to inflation, with average selling prices increasing at the fastest pace in almost six years and prices set to rise even more rapidly next month.

Ben Jones, CBI Principal Economist, said: “The rebound in retail sales suggests that some of the recent gloom about a slump in consumer demand at the start of 2017 may be overdone.

“However, retailers remain cautious about their prospects, expecting fairly tepid growth in sales volumes next month against a backdrop of rising inflation that is likely to erode households’ purchasing power through the course of the year.

“As the impact of the weaker pound feeds through supply chains, retailers are trying to absorb some of the increase in their import costs through savings.”

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