UK’s retail sales recover after slump last month

A REBOUND in retail sales has cooled predictions of a slump in consumer demand at the start of the year, figures suggest.

Retail sales volumes grew modestly in the year to February following a fall in January, according to the CBI’s latest quarterly Distributive Trades Survey of 128 firms.

The poll, which included 64 retailers, found that sales volumes are expected to rise again in the year to March, albeit at a slightly slower pace.

Some 40% of retailers said that sales volumes were up in February on a year ago, while 31% said they were down, giving a balance of positive 9% — up from a fall in the previous survey of negative 8%.

A third of those polled (33%) expect sales volumes to increase next month, while 28% expect a decrease.

However, 35% placed fewer orders with suppliers than they did a year ago, compared with 24% who ordered more goods.

The slight increase in overall retail sales was driven by the clothing and non-store sectors, as well as other normal goods, the CBI said.

Year-on-year growth in internet sales volumes slowed although retailers expect them to pick up slightly next month.

However, for the first time in four and a half years, retailers expect their business situation to deteriorate over the next three months.

Some 42% of retailers said rising cost pressures was a factor driving the deterioration, while 35% cited uncertainty over Brexit negotiations, 23% pointed to expected weakening in sales volumes and 18% said they expected profits to weaken.

The survey found 83% said average costs were higher than this time last year, with average selling prices increasing at the fastest pace in almost six years and prices set to rise even more rapidly next month.

CBI principal economist Ben Jones said: “The rebound in retail sales suggests that some of the recent gloom about a slump in consumer demand at the start of 2017 may be overdone.

“However, retailers remain cautious about their prospects, expecting fairly tepid growth in sales volumes next month against a backdrop of rising inflation that is likely to erode households’ purchasing power through the course of the year.”