Retail sales fall below seasonal norms in January - CBI

Retail sales were viewed as poor for the time of year in January, for the first time since September, according to the CBI’s latest Distributive Trades Survey – and sales are expected to remain below seasonal norms next month.

The survey of 101 firms, including 42 retailers, was conducted between 22 December and 18 January. This was a period when the UK was operating under tightened Covid restrictions amid the spread of the Omicron wave (notably including work from home guidance).

Sales grew at an above average pace in the year to January, but this compares sales this month with January 2021, when COVID restrictions required non-essential retail stores to close across the UK.

Growth in orders placed with suppliers eased markedly, despite this base effect. Sales volumes are expected to grow at a slightly slower pace in the year to February, while the pace of orders growth is expected to accelerate.

Internet sales were broadly flat in the year to January and are expected to remain broadly flat in the year to February.

Meanwhile in other parts of the distribution sector, both wholesalers and motor traders reported sales above seasonal norms – and expect this trend to continue next month.

Across the distribution sector, stock volumes in relation to expected sales were seen as too low, after being broadly adequate last month, with relative stock levels seen as too low in each of the three main sectors. Relative stocks are expected to remain too low again in February.

Ben Jones, Lead Economist at the CBI, said:

“It was not surprising that retail sales dropped back below seasonal norms in January, given the spread of Omicron, the reintroduction of restrictions late last year and increased consumer caution.

“Even as cases fall and Omicron-related restrictions are rowed back, retailers will be looking to the year ahead with a degree of concern. The sector faces an inflation double whammy, as rising energy and transport costs erode households’ spending power and retailers’ own costs continue to mount.

“It is vital that the Government comes forward with measures to protect the most vulnerable consumers, who will struggle the most with anticipated price rises.”

Key findings (all figures are weighted balances)

Retail

• Retail sales were seen as poor for the time of year in January (-23% from -2% last month) to the greatest extent since March 2021. Sales are expected to remain below seasonal norms in February (-17%).
• Retail sales grew at an above average pace in the year to January (+28% from +8%), and are expected to grow at a slightly slower pace in the year to February (+24%).
• Growth in orders placed with suppliers eased sharply in the year to January (+17% from +55%). Growth is expected to pick up again next month (+28%).
• Internet sales were broadly flat in the year to January for the second straight month (-2% from +3%) with expectations for flat growth again next month (+2%).
• Retail stocks in relation to expected sales were seen as too low in January (-11% from +20%). This was the eighth month out of the past nine that relative stock levels were too low, with expectations for this to remain the case next month (-4%).

Wholesalers and motor trade

• Wholesalers reported sales as good for the time of year for the tenth consecutive month, although to a lesser extent than December (balance of +30% from +43%). Sales are expected to remain above seasonal norms to a similar extent (+30%) in February.
• Motor traders reported sales as good for the time of year (+10% from -39%) with sales expected to be further above seasonal norms (+33%) next month.