Retail sales in June suffered their worst year-on-year fall recorded by the CBI's monthly Distributive Trades Survey, published today (Wednesday). However, this year-on-year comparison exaggerates the underlying picture, as June 2004 was a particularly good month for retailers.
Sales volumes compared with a year ago recorded the sharpest fall in the survey's 22 year history and stores expect a similar pattern in July.
Forty-two per cent of retailers said their sales volumes were down over the year to June, compared with 23 per cent saying they were up - a balance of minus 19 per cent, which compares with minus seven per cent in May and minus 14 per cent in April. The survey's less volatile three month trend in sales, which has been falling since the beginning of the year, is also the lowest recorded since the survey began in 1983.
However, these results may exaggerate the underlying picture, as June 2004 was a particularly good month for retailers. Sales for the time of year in this survey were considered poor by retailers but not as bad as they were in the spring. For June 2005 a balance of minus 27 per cent of respondents reported sales as below average, a deterioration on May (-15) but still better than March (-37) and April (-36). Sales are expected to remain weak during July.
With sales volumes weak, retailers cut back on orders placed with suppliers at the fastest rate since January 1999. A further reduction in orders is expected in July, although at a slower rate.
In relation to demand, stock levels continued to increase in June, despite the rapid reduction in orders from suppliers. Retailers are expecting to reduce stocks in July.
Grocery sales volumes continued to increase strongly, with specialist food stores the only other retail sector reporting an increase. Firms selling furniture and carpets, hardware, china & DIY - all clearly dependent on the housing market - reported particularly poor sales. Footwear and leather sales also fell sharply following an improvement last month. Clothing sales remained weak but showed some improvement compared with April and May.
John Longworth, Executive Director of ASDA and Chairman of the CBI's DTS Panel, said: "A year ago retailers were reaping the benefit of 'Euro 2004' which was credited with boosting sales of everything from football clothing to TVs and beer. But while this may explain part of the record year-on-year decline now registered, there is no doubt that the underlying picture is also bad.
"Last year's interest rate rises, were as usual, slow to take effect but consumers have clearly tightened their belts quite significantly since the beginning of this year. With the slowdown in the housing market and a rise in energy bills it's not surprising retailers are suffering, although some more than others. Over the past two weeks many stores have brought forward their summer sales in an attempt to encourage shoppers and to shift seasonal stock."
In contrast to the high street, wholesalers reported another healthy increase in sales volumes over the year to June, with growth exceeding expectations. A further, although slightly smaller increase is expected in the year to July.
Motor traders' sales continued to fall sharply over the year to June and at the fastest rate since January. Firms anticipate an even larger fall in sales volumes in the year to July, with expectations for the month ahead the weakest for almost five years.
The Distributive Trades survey covers 20,000 outlets of firms responsible for 40 per cent of employment in retailing. It includes measures of sales activity across the distributive trades. It was first introduced in 1983 and the retail results form the UK component of the EC survey of retail trades. The survey was conducted between 31 May and 15 June 2005. There were 125 responses.
The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce.
Member companies, which decide all policy positions, include:
- 80 of the FTSE 100
- some 200,000 small and medium-size firms
- more than 20,000 manufacturers
- over 150 sectoral associations.
No other UK organisation represents as many major employers, small and medium-size firms or companies in the manufacturing or service sectors.
The CBI's broad-based membership gives it unrivalled influence with the UK government. The organisation is also the UK's official business representative in the European Union, which generates more than 50 per cent of regulation affecting British firms.
With offices across the UK as well as in London, Brussels and Washington, the CBI coordinates British business representation around the world.