The UK high street endured another month of falling sales and expects the hard times to continue in October, but supermarkets enjoyed solid sales growth, the CBI said today (Wednesday).
Responding to its latest Distributive Trades Survey, 21% of retailers said that the volume of sales in the first half of September was up on last year, while 48% said they were down.
The resulting balance of -27% marks a third consecutive month of sharply contracting sales, but is better than firms had feared (-42%), and is an improvement on the survey record low in August (-46%). Nevertheless, the outlook for October remains very weak (-30%).
The three-month moving average of sales volumes, which smoothes out monthly volatility, continued on its downward trend to a balance of -36%.
A balance of 46% of firms said their volume of sales for the time of year was poor, and a similar balance (44%) expect a tough October.
Slow demand on the high street has had a knock-on effect on the volume of orders made with suppliers. A balance of 39% of retailers reported a year-on-year fall in order volumes, which is a slight improvement on August (-56%). Stock levels were described as more than adequate to meet expected demand by a net 20% of firms.
Looking at individual sectors, the supermarkets continued to weather the economic slowdown, and a balance of 37% of grocers reported sales growth. All the other sectors saw a fall in sales compared to a year ago, especially those linked to the housing market.
Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Retail Director of Asda, said:
"Shoppers are increasingly focusing on price as the economy continues to slow and household budgets get tighter. There has been a marked migration to the value end of the market, and many have cut back on luxuries, although the drop in petrol prices should give a bit more breathing space.
"Retailers of big ticket items like furniture and white goods, who are closely tied to the ailing housing market, continue to suffer. Supermarkets have fared much better in these difficult times, particularly those that have realigned their range to match the price conscious."
John Cridland, CBI Deputy Director-General said:
“Sadly, there has been no Indian summer after the sales washout of August, and the retail outlook for early autumn remains bleak. Consumers are feeling the brunt of the economic slowdown as the UK endures what is likely to be a short and mild recession.
“As inflationary pressures ease over the next few months, the Bank of England should have some leeway to lower interest rates, and a 0.5% cut in November would provide some welcome relief to consumers and businesses.”
Wholesalers fared better than they had expected, and only a balance of 4% of firms said that sales volumes were down over the year to September. A balance of 14% expects volumes to fall in October. Clothing, textiles & footwear wholesalers reported sales growth on a year ago, while builders' merchants had a third consecutive difficult month.
Over the year to September, motor traders saw sales volumes fall heavily (a balance of -78%) for the fourth month running, and October is set to be similar (-86%). The weak demand is shared by both sellers of vehicles and parts & accessories.
1. The Distributive Trades Survey (DTS) 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. It is an accurate early indicator of monthly retail sales.
2. The survey was conducted between 28th August and 17th September. 149 firms took part.
3. A balance is the difference between the percentage of retailers reporting an increase and those reporting a decrease.
4. 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. 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 Brussels, Washington and Beijing, the CBI coordinates British business representation around the world.