Retail downturn deepens as festive period disappoints – CBI distribute trends survey

Retail sales volumes fell at a fast pace in the year to December, according to the latest monthly CBI Distributive Trades Survey. This marked the eighth consecutive month of decline in year-on-year sales.

Looking ahead, retailers appear to be gloomy about the sector’s fortunes in the new year, with firms anticipating an even sharper contraction in sales next month.

The key survey findings included:

• Retail sales volumes fell in the year to December at a faster pace than last month (weighted balance of -32% from -11% in the year to November). Sales volumes are expected to decline at an even quicker rate next month (-41%).
• Sales volumes were seen as below “average” for the time of year in December, and to a greater degree than last month (-25% from -16% in November). Volumes are expected to fall well short of seasonal norms again next month (-37%).
• Retailers cut back on orders placed upon suppliers in the year to December at the fastest pace since May 2020 (-54% from -22% in November). The reduction in orders is expected to soften next month (-29%).
• Retailers judged stock volumes to be “too high” relative to expected sales in December (+10% from +13% in November). Stock positions are expected to remain broadly unchanged next month (+11%).

Martin Sartorius, CBI Principal Economist, said:

“The retail sector ended 2023 on a glum note, with the ongoing downturn in sales volumes deepening during the crucial holiday trading period. Looking ahead, retailers are bracing themselves for a New Year’s chill, as sales are set to fall at an even quicker pace next month.

“Strained household finances and higher interest rates continue to take a toll on consumer spending, suggesting that retailers will have to navigate a tough demand environment in the months to come. In this context, a hike in business rates for many retailers, alongside a rise in the National Living Wage, will heap more pressure on the sector in the new year.”

In addition, data from the survey showed:

• Internet sales volumes declined at a firm pace in the year to December (-41% from -39% in November), and look set to continue falling next month (-41%).
• Elsewhere in the distribution sector, wholesale volumes declined quickly in the year to December (-24% from -11% in November) and are expected to contract at a slower pace next month (-18%). In contrast, sales volumes in motor trades rose rapidly in the year to December (+56% from +6% in November) and are expected to maintain firm growth next month (+50%).

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