27th October 2014
Retail sales volumes continued to grow in the year to October, with another strong rise expected in the month ahead, according to the Confederation of British Industry (CBI).
The CBI’s latest monthly Distributive Trades Survey of 124 firms showed a third successive month of firmly above-average sales growth.
Specifically it found that 48% of retailers said sales volumes increased in the year to September, while just 17% said they fell – giving a balance of +31%. In addition the volume of orders placed on suppliers rose at a faster pace than expected, while stock adequacy picked up strongly.
But sales growth was mixed across different sub-sectors, and sales fell below average for the time of year.
Grocers and the clothing sector in particular saw an acceleration in sales growth. However a fall in sales was reported in other sectors, including hardware & DIY and specialist food & drink. Chemists’ sales fell for a second consecutive month.
Rain Newton-Smith, CBI director of economics, said: “Sales on our high streets are still ticking along and, with similar prospects next month, retail growth is looking more stable.
“The clothing sector in particular appears to be bouncing back after the mild weather in September deterred people from buying their winter warmers. The recent fall in inflation may help lift the spirits of households by making their budgets stretch further. But risks remain to the UK recovery more generally, with the Eurozone stalling, conflict in the Middle East and tensions over Ukraine. This could have an impact on consumer confidence and spending going forward.”
Commenting on the data, Howard Archer chief UK and European economist at IHS Insight said that the very decent October CBI distributive trades survey provides some reassurance that consumers are still prepared to spend at a healthy rate.
He added: “Retailers will be very much hoping that this remains the case as the critical Christmas period looms on the horizon. There are certainly still decent supports for consumer spending and retail sales going forward, notably high and rising employment and very low consumer price inflation. In addition, consumers may be reassured by recent signs that the Bank of England may hold off raising interest rates until around mid-2015.”
Nevertheless, Archer asserted that it remains questionable how strong consumer spending can be on a sustained basis until current very low earnings growth picks up appreciably.