Retail sales cease their decline in November

Retailers reported broadly unchanged sales volumes in the year to November after six consecutive months of declining annual sales, according to the latest quarterly CBI Distributive Trends survey. Retailers expect growth to return in the year to December, with their strongest expectations in seven months.

Business conditions are expected to remain stable over the next three months and total employment was broadly flat in the year to November, with the strongest growth in part time employment in five years counterbalanced by a further fall in full-time employment. However, orders placed upon suppliers fell for the seventh consecutive month, and at a faster pace than in October. And retailers are once again planning to spend less on investment next year than they did this year.

Within the retail sector, grocers made the greatest positive contribution to the headline figure this month, with negative contributions coming primarily from non-specialised stores, but also clothing and non-store retail. Meanwhile, internet sales growth in the year to November eased to the slowest pace seen since June and is expected to remain at this below-average pace next month.

Wholesalers will go into the Christmas period feeling less than merry as their expectations for above-average growth was instead met with the sharpest fall in sales since August 2012. Orders also fell at their fastest pace since July 2016, with further contractions expected in both measures next month.

Anna Leach, CBI Deputy Chief Economist said:

“Retailers are entering the festive season with a bit of hope that sales will head up, with the strongest expectations in half a year. Actual sales have also stabilised and have nudged above average for the time of year. And employment has stopped falling after three years of decline. But Brexit uncertainty continues to weigh on investment plans for the year ahead which remain weak.

“As the election period gets into full swing, retailers will welcome the prominence being given to fixing the broken business rates system. But it will be up to the next Government to turn warm words into action.”

Across the economy more broadly, growth has been volatile during 2019, as activity has shifted in response to moving Brexit deadlines, and underlying momentum has slowed. We expect the economy to continue to grow modestly in the event of a “smooth” transition to a new Brexit deal, with a no-deal Brexit likely to hit output and financial markets significantly. For more detail, see our July economic forecast (our next forecast will be published in early December).

Key findings

Retailers

• 38% of respondents reported that sales volumes were up on a year ago in November, while 41% said they were down, giving a balance of -3% - the highest balance in 7 months
• Retailers expect sales volumes to increase in the year to December (+21%), with 44% expecting a rise and 23% expecting a fall
• Sales were seen as above average for the time of year to the greatest extent since April: 38% reported sales for the time of year as good and 30% reported them as bad, giving a rounded balance of +8%. This is expected to improve further in December (+15%)
• Orders placed upon suppliers fell for the seventh consecutive month in annual terms: 32% reported an increase while 42% reported a fall, giving a rounded balance of -9%. Retailers expect a recovery in orders growth next month (+12%)
• Stock levels in relation to expected sales eased from the record high last month (+30% from +52%) and are expected to return to broadly average in December (+18%)
• Business conditions are expected to remain stable over the quarter ahead (+4%), following a sharp weakening in expectations last quarter (-25%)
• Investment intentions for the year ahead fell for the sixth consecutive quarter (-38%) and at a faster pace than last quarter (-19%)
• Total employment was broadly flat in the year to November (-4% from -13% in October), the most positive performance in three years. This was driven by the fastest pace of increase in part-time employment in five years (+18% from -6%), while full time employment continued to decline (-24% from -16%)
• Average selling prices in the year to November grew at a similar pace to last quarter (+64% from +67%), with a slight easing expected next quarter (+53%)
• Annual internet sales eased to the slowest rate of growth since June (+25% from 49%), with a similar rate of growth expected next month (+23%).

Wholesalers

• 29% of wholesalers reported sales volumes to be up on last year and 60% said they were down, giving a balance of -31%. Sales volumes are expected to fall at a slower pace next month (-14%)
• Orders placed upon suppliers fell at the sharpest rate since July 2016 (-25% from +7%), with a further deterioration expected in the year to December (-31%)
• Wholesale stocks fell sharply in relation to expected sales from a near-record high last month to a level considered marginally below adequate (-5% from +43%).

Motor trades

• 40% of motor traders reported sales volumes to be up on last year and 52% said they were down, giving a balance of -12%.