Retail sales darken in December - CBI

The survey of 90 firms, of which 45 were retailers, also showed that sales are expected to be flat in the year to January. Orders placed with suppliers dropped in the year to December, also at the quickest pace since October 2017, with orders expected to continue to fall next month, but at slightly slower pace. 

Sales volumes for the time of year were significantly below average to the greatest degree since November 2011. Sales are expected to remain below average in January.

Within the retail sector, growth in sales and volumes were reported only in the non-store (i.e. internet and mail order) and furniture & carpets sectors. Sales fell elsewhere, with notable declines seen in the non-specialised (i.e. department stores), durable household goods, and other normal goods sub-sectors.  

Anna Leach, CBI Head of Economic Intelligence, said:

“Retailers report a sharp drop in sales volumes in the year to December, so it’s clear the sector continues to feel the impact from pressures on household incomes and digital disruption. Brexit uncertainty may also be affecting consumer sentiment and spending.

“High street shops – like other businesses – are concerned about the rising risk of a disorderly no-deal exit from the EU. Urgent action to resolve the Brexit stalemate is needed to give the retail sector confidence to make crucial decisions about investment.”

In contrast to the headline figures, year-on-year growth in internet sales volumes picked up pace to sit broadly in line with the long-run average in December. Sales volumes are expected to expand at a slightly slower pace in January.

Nevertheless, distribution volumes as a whole continued to grow in the year to December, underpinned by robust growth in wholesaling and motor trades. In the year to January, the trend is set to remain the same with distribution growth supported by the wholesaling and motor trades sectors. Momentum in the retail sector is likely to remain relatively subdued going forward, as firms continue to grapple with weak household income growth and structural changes posed by digital disruption. Meanwhile, uncertainty around the impact of Brexit may drag on consumer confidence and spending impetus. For more detail on our broader view of the economic outlook, see our December economic forecast.

Key findings: 

Retailers  

• 28% of respondents reported that sales volumes were up on a year ago, while 41% said they were down, giving a balance of -13%.
• Retailers expect sales to be flat next month (+0%), with 32% expecting them to rise and 32% to fall.
• Sales volumes for the time of year were significantly below average (-35%), to the greatest degree since November 2011. Sales are expected to remain below average in January (-22%). 
• The volume of orders placed on suppliers fell in the year to December, giving a balance of -23% - the fastest drop since October 2017. Orders are expected to fall at a slightly slower pace next month (-18%).
• Year-on-year growth in internet sales volumes picked up to sit broadly in line with the long-run average in December (+48%). Growth is expected to expand at slightly slower pace in January (+44%).
• Growth in sales volumes was seen in the non-store (i.e. internet and mail order) (+61%) and furniture & carpets (+25%) sub-sectors.
• However, falling sales volumes were reported in the non-specialised (i.e. department stores) (-47%), durable household goods (-50%), and other normal goods (-53%) sub-sectors.

Wholesalers

• 43% of wholesalers reported sales volumes to be up in the year to December and 13% said they were down, giving a balance of +30%.  

Motor trades 

• 61% of motor traders reported sales volumes to be up on last year and 32% said they were down, giving a rounded balance of +30%.

Notes to Editors:

Firms responding to the Distributive Trades Survey (DTS) are responsible for a third of employment in retailing. The survey includes measures of sales activity across the distributive trades. It was first introduced in 1983 and the retail results form the UK component of the EC survey of retail trades.

The survey was conducted between 26 November and 14 December. 90 firms took part, of which 45 were retailers, 39 were wholesalers, and 6 were motor traders.

A balance is the difference between the percentage of retailers reporting an increase and those reporting a decrease.