Falling sales weigh on retail confidence – CBI Distributive Trades Survey

Retail sales volumes fell at a strong pace in the year to August, extending the downturn to an eleventh consecutive month. That is according to the CBI’s latest quarterly Distributive Trades Survey. Retailers expect the pace of decline to ease in September.

Weak demand and gloomy sentiment continue to weigh on retailers’ investment and hiring plans. Price pressures remain elevated, with selling prices rising at their fastest rate since November 2023.

Key findings included:

• Year-on-year retail sales volumes fell at a strong pace in August (weighted balance of -32% from -34% in July). Sales are expected to decline at a slower rate next month (-16%).
• Retail sales for the time of year were judged to be “poor”, to a somewhat greater extent than in July (-19% from -10% in July). Next month’s sales are set to remain below seasonal norms to a similar degree (-20%).
• Sentiment among retailers remained poor, with their business situation expected to deteriorate over the coming quarter, but to a lesser extent than last quarter (-10% from -29% in May).
• Retailers expect to reduce capital expenditure over the next 12 months (compared to the previous 12) to a slightly lesser degree than in May (-42% from -47% in May), but intentions remain poor by historical standards (long-run average of -3%).
• Retail employment continued to decline at a broadly unchanged rate in the year to August (-14% from -15% in May). Headcount is expected to fall at a slightly quicker pace next month (-19%).
• Retail selling price rose in the year to August at the fastest rate since November 2023 (+65% from +35% in May). Retailers anticipate selling prices to increase at a relatively slower pace in September (+43%).
• Total distribution sales volumes (including retail, wholesale, and motor trades) fell in the year to August at a slower rate compared to July (-28% from -39% in July). The rate of decline is expected to ease further next month (-23%).

Martin Sartorius, CBI Principal Economist, said:

“Retailers endured another tough month in August, with annual sales volumes falling for the eleventh consecutive month. Weak demand and higher labour costs continue to put pressure on margins, dampening sentiment across the retail and wider distribution sector. This downbeat outlook is reflected in firms’ plans to scale back investment and hiring.

“The government’s fiscal decisions are continuing to bite, and retailers’ struggles send a clear signal: business cannot be asked to balance the books again at the Autumn Budget. Building business confidence through delivery must be the priority — starting with a rethink of the Employment Rights Bill, which risks piling on unnecessary costs and holding back jobs and investment.”

In addition, data from the survey showed:

• Online retail sales volumes were broadly flat in the year to August (+3% from +4% in July) but are expected to contract at a fast rate in September (-35%).
• Retail orders placed upon suppliers declined at an accelerated rate in the year to August (-40% from -21% in July). Retailers expect to cut back on order volumes at a strong pace in September (-32%).
• Retailers reported that stock volumes relative to expected sales strengthened in August (+23% from +12% in July; long-run average +17%) but are expected to soften next month (+16%).
• Wholesales annual sales volumes declined at a moderately slower rate in August (-25% from -32% in July) and are expected to fall at a steady pace next month (-26%).
• Motor trades annual sales volumes contracted at a notably slower rate in August (-30% from -70% in July). Sales are anticipated to decline at the same pace in September (-30%).