26 March 2015

  |  CBI Updates Team


Economic update 27 March 2015

According to the ONS, retail sales volumes (excl. auto fuel) grew by 0.7% in February, slightly stronger than consensus expectations for an increase of 0.4%. This comes after a fall of 0.3% in January.

Economic update 27 March 2015

The latest CBI Distributive Trades survey showed retail sales growth picked up in the year to March, rebounding from the previous month, when volumes were, somewhat surprisingly, reported as being flat. Sales volumes were broadly average for the year and retailers expected sales growth to rise solidly again in the year to April.

CPI inflation slowed to 0.0% in February (down from 0.3% in January), the lowest since records began in 1960. This was slightly below our expectation of 0.2% inflation and the consensus forecast of 0.1%. The slowing of the inflation rate between January and February was mainly driven by transport (where prices fell by 2.7% on a year ago) and food (-3.3%), both of which are highly influenced by global commodity prices. Anecdote from our members also points to disinflationary pressure from heavy discounting among supermarkets.

Looking ahead, March’s inflation figure will include the cuts to retail gas & electricity prices made by the major energy suppliers at the end of February. As a result, headline inflation looks likely to turn negative.

However, we do not expect a prolonged or widespread fall in prices (i.e. deflation). Indeed, CPI inflation should start to pick up from the end of 2015, as the oil price effect unwinds and domestic inflationary pressures build.

In the manufacturing sector, the latest monthly CBI Industrial Trends Survey showed that the level of total orders remained robust, while export orders weakened sharply. Output expanded moderately over the three months to March, with the pace of growth slowing a little on February. Firms continued to expect growth to accelerate in the coming three months.

For more information please contact mia.andersson@cbi.org.uk