Wet weather dampens retail sales in February – CBI Distributive Trades Survey

Retail sales volumes fell at a rapid pace in the year to February, extending a run of weakness that dates back to mid-2023. Sales are expected to decline again next month, albeit at a slower rate, according to the CBI’s latest quarterly Distributive Trades Survey.

Persistently weak demand continues to weigh on sentiment, with retailers expecting their business situation to deteriorate over the coming quarter to one of the greatest degrees in 17 years.

Against this backdrop, retailers are pulling back on both investment and headcount. Numbers employed in the year to February fell at the fastest rate since May 2023, and the pace of decline is expected to quicken slightly next month.

Key findings included:

• Retail sales volumes fell at a rapid pace in the year to February (weighted balance of -43% from -17% in January). However, the rate of decline is expected to decelerate next month (-17%).

• Sales for the time of year were judged to be “poor” in February to a similar extent to January (-16% from -15% in January). Next month’s sales are set to fall short of seasonal norms to a lesser degree (-9%).

• Sentiment amongst retailers fell at a similar pace to last quarter, marking one of the quickest declines in 17 years (-34% from -35% in November).

• Retailers expect to reduce capital expenditure over the next 12 months (compared to the previous 12) to a slightly greater degree than in November (-46% from -42% in November; long-run average of -4%). 

• Retail employment declined in the year to February at the fastest pace since May 2023 (-40% from -19% in November). Headcount is expected to fall at a marginally quicker pace next month (-44%).

• Retail selling prices grew at a pace in line with the long-run average in the year to February (+41% from +46% in November; long-run average of +41%). Retailers anticipate selling price inflation to remain broadly unchanged next month (+42%). 
• Total distribution sales volumes fell in the year to February at a faster rate compared to January (-40% from -34% in January). Sales are set to decline at a moderately slower pace next month (-28%).

Martin Sartorius, Lead Economist, CBI, said:

“Retail sales volumes fell at a sharp pace in the year to February, with some firms reporting that the wet weather discouraged shoppers from visiting stores. Soft demand conditions and elevated costs have continued to feed through to gloomy sentiment in the retail and broader distribution sector, prompting many firms to scale back investment plans and headcount.

“The Spring Forecast represents an important milestone for the government to build momentum behind its growth mission. Firms will be looking for the Chancellor to set out how the government plans to mitigate the impact of rising employment costs in the distribution sector, particularly given its vital role in providing first jobs for young people.”

In addition, data from the survey showed:

• Online retail sales volumes recovered in the year to February, growing at the fastest pace since April 2021 (+43% from -41% in January). Retailers expect online sales to grow at a similar rate in March (+42%).

• Retailers’ orders placed upon suppliers declined at an accelerated rate in the year to February (-47% from -27% in January). However, retailers expect to reduce orders at a markedly slower pace next month (-9%).

• Retailers reported that stock volumes relative to expected sales eased relative to January (+11% from +20% in January; long-run average of +17%) and are expected to soften further in March (+7%).

• Wholesale annual sales volumes fell at a slower pace in February (-36% from -46% in January), with the rate of decline set to remain steady next month (-33%).

• Motor trades sales volumes contracted at a quicker rate in the year to February (-47% from -28% in January) but are expected to decline at a slightly slower pace next month (-42%).