Retail price growth cools in May amid weak demand – CBI Distributive Trades

Retail selling prices grew in the year to May at the slowest rate in over a year – according to the CBI’s latest quarterly Distributive Trades Survey – and are set to grow at a similar pace in June.

Sales volumes in the retail sector fell short of seasonal norms in May, while annual sales volumes continued to fall but at a slightly slower pace. Next month, sales are expected to remain “poor” for the time of year, with the sales decline in annual volumes set to ease slightly further.

Weak demand continues to weigh on retailers’ sentiment, which has remained negative since mid-2024, as firms anticipate that their business situation will deteriorate over the coming quarter.

Against this backdrop, retailers expect to pare back both investment and hiring plans, extending a period of weakness that dates back to 2022.

Key findings included:

• Retail selling prices grew in the year to May at the slowest rate since February 2025 (+28% from +41% in February; long-run average of +41%). Retailers anticipate price inflation to rise at a broadly steady pace next month (+27%).
• Retail sales for the time of year were judged to be “poor” in May, to a comparable extent to last month (-35% from -32% in April). June’s sales are set to fall short of seasonal norms to a lesser degree (-14%).
• Retail annual sales volumes fell in May at a decelerated pace, following April’s steep drop (weighted balance of -46% from -68% in April). Retailers expect the rate of decline to moderate further next month (-36%).
• Sentiment amongst retailers fell at a slower pace compared to the previous two quarters that had marked some of the quickest declines in 17 years (-15% from -34% in February).
• Retailers expect to reduce capital expenditure over the next 12 months (compared to the previous twelve) to the greatest extent since February 2025 (-52% from -46% in February; long-run average of -4%).
• Retail employment declined at a slower – albeit still strong – pace in the year to May (-30% from -40% in February). Headcount is expected to fall at a slower pace next month (-15%), marking the least negative expectations in a year.
• Total distribution sales volumes fell at a marginally slower rate in the year to May (-35% from -39% in April) and are anticipated to ease further next month (-28%).

Charlotte Dendy, Economic Surveys & Data Manager, CBI, said:

“The marked slowdown in retail price growth reported in May underscores the weakness in demand that retailers continue to face. With sentiment among retailers negative for two years now, businesses expect to cut back further on investment, while continuing to reduce headcount.

“That said, inflation is set to pick up significantly in the months ahead, driven by renewed price pressures from conflict in the Middle East. We're already seeing early signs of this in wholesalers’ selling price inflation, which jumped in the year to May. This will add further pressure to an already fragile demand environment for the distribution sector.

“The Chancellor’s decision to temporarily cut VAT on family activities over the summer should help support consumer confidence during a challenging period for demand. But lasting progress on the cost of living depends on making it easier and cheaper for firms to operate. For retail and the broader distribution sector, that means meaningful business rates reform, further steps to reduce business energy costs, and a renewed focus on cutting unnecessary regulatory burden.”

In addition, data from the survey showed:

• Online retail sales volumes recovered in the year to May (+11% from -51% in April) but are expected to fall at a sharp pace next month (-40%).
• Retailers’ orders placed upon suppliers declined at a slower but still strong pace in the year to May (-39% from -46% in April). Orders are set to be cut back at a slightly slower rate in June (-31%).
• Retailers reported that stock volumes relative to expected sales were above the long-run average (+24% from +12% in April; long-run average of +17%), however stock positions are expected to soften in June (+9%).
• Wholesale annual sales volumes fell at a slower pace in May (-26% from -32% in April), with the rate of decline set to remain similar next month (-25%).
• Motor trades sales volumes contracted at an accelerated rate in the year to May (-46% from +6% in April) but are expected to decline at a notably slower pace next month (-18%).