Retail sector shows continuing signs of weakness - CBI Distributive Trends Survey

Retail sales volumes fell in the year to July at the fastest pace since April 2022, in the latest sign that trading conditions in the sector remain challenging. Retailers expect the downturn to gather pace next month, according to the latest CBI Distributive Trades Survey.

The key survey findings included:

• Retail sales volumes in the year to July fell at the fastest pace since April 2022 (weighted balance of -25% from -9% in the year to June). Sales are expected to fall even more quickly next month (-32%).
• Orders placed upon suppliers in the year to July fell at the fastest pace since January 2021 (-39% from -10% in June). Orders look set to fall at a slightly quicker rate next month (-45%).
• Stock volumes were reported as elevated relative to expected sales in the year to July, though to a lesser extent than last month (+25% from +33% in June). Retailers expect stock positions to remain similarly elevated next month (+24%).

Martin Sartorius, CBI Principal Economist said:

 “Retail sales volumes fell for a third consecutive survey in July, and at the fastest pace since April 2022. Firms remain cautious about the retail sector’s near-term outlook as they pare back on orders and brace themselves for another sales contraction in the year to August.

Cost pressures, a tight labour market, and rising interest rates, alongside uncertain demand conditions, make the current environment difficult to navigate for retailers. Now more than ever, business rates reform would go a long way to alleviate cost pressures in the retail sector, which burden them disproportionately compared to other businesses.”

In addition, the data showed:

• Retail sales volumes were seen as typical for the time of year (-1% from +1% in June) and are expected to remain broadly in line with seasonal norms next month (-1%).
• Internet sales volumes declined sharply in the year to July (-46% from +26% in June) and are expected to continue falling at a broadly similar pace next month (-48%).
• Elsewhere in the distribution sector, wholesale volumes in the year to July fell at a slightly slower pace than last month (-9% from -15% in June), with a broadly similar decline expected next month (-6%). Motor traders reported that sales in the year to July fell at a quicker pace than last month (-27% from -11% in June). Motor trade sales are expected to fall again next month, but at a slightly slower pace (-20%).

 The survey included 135 companies, of which 59 were retailers.