Clothes rail retail

UK retailers saw an unexpected drop in sales in September following last month’s increase, as 38% say their sales volumes were down in September year-on-year.

In comparison, 30% of retailers say their sales volumes were up in September on a year ago, giving a balance of -8%.

This was below expectations of +3% and a decline on August’s balance of +9%, according to the Confederation of British Industry (CBI).

The annual survey of 120 firms, of which 63 were retailers, showed that the volume of sales fell, despite expectations last month that sales would be largely unchanged.

It found 27% of respondents expect sales volumes to increase next month, with 20% expecting a decrease, giving a balance of +7%, whilst 21% of retailers placed more orders with suppliers than they did a year ago, while 29% placed fewer orders, giving a balance of -8%

Nineteen per cent of businesses reported that their volume of sales for the time of year were good, while 12% said they were poor, giving a balance of +7%

Growth in internet sales volumes slowed in the year to September (+32%) from the previous month (+42%) and sales volumes grew in clothing (+41%) and hardware and DIY (+55%).

Sales volumes fell markedly for grocers (-29%), specialist food & drink (-34%), footwear and leather (-38%).

Rain Newton-Smith, CBI chief economist, said: “September is normally an important month for retailers and it’s encouraging to see that sales of clothing, DIY goods and hardware are above seasonal norms.

“However, consumer confidence has been dented since earlier in 2016 and higher inflation is likely to squeeze household incomes over the year ahead. With margins remaining tight, retailers are set to continue to operate in a fiercely competitive environment for some time.”

However, CBI said sales volumes look set to grow slightly in the year to October and overall, sales volumes for the time of year were considered to be above seasonal norms.

Ruth Gregory, UK economist, Capital Economics said: “We should we wary about reading too much into these results. The CBI survey has been consistently underestimating growth in retail sales since the start of the year, so the latest readings may well have been overstating the extent of any slowdown.

“What’s more, while softer labour market conditions and rising inflation should bear down on spending growth ahead, other supportive factors, including low interest rates and a likely easing in the fiscal squeeze in the Autumn Statement later this year, should help prevent consumer spending from easing sharply.”

The CBI report corresponds with the British Retail Consortium (BRS) retail figures that found the Olympics and warmer weather stole the attention of shoppers last month and overall sales declined 3%.

Capital Economics predict that the growth in household spending will only slow from about 2.7% in 2016 to around 1.5% next year.