Retail sales growth quickens but stores and analysts remain pessimistic

 
Tom Rees
BRITAIN-FEATURE-DAILY-LIFE-BREXIT
Clothing sales, in addition to grocery, drove overall growth (Source: Getty)

Retail sales grew at their fastest pace since September 2015 in the year to April but shops remain wary of rising inflation slowing growth during the rest of the year, according to a survey by the Confederation of British Industry (CBI).

Ben Jones, CBI principal economist, said clothing and grocery in particular were driving overall growth with the warm weather in early April helping retailers. Analysts highlighted that sales in anticipation of the Easter weekend had also distorted growth.

A total of 59 per cent of retailers participating in the survey said sales volumes in April were up compared to a year ago while 21 per cent said they were down, the highest figures in a year-and-a-half. The +38 per cent balance outperformed expectations but only 37 per cent of respondents expected sales volumes to continue to increase.

Sector slips

The survey also found the strong performance wasn’t replicated across the board with furniture and specialist food and drink stores reporting a second consecutive month of falling sales. Internet sales and wholesaling experienced solid growth but car traders saw growth slow after an exceptionally strong performance in March.

“Retail sales held up better than expected, especially considering that the survey did not cover the Easter period. However, retailers are still cautious over the outlook, expecting slower growth over the year to May, as higher inflation eats into household spending,” said Jones.

He added: “With price competition remaining fierce and rising costs squeezing margins, retailers face mounting pressures in the months ahead.”

Analysts were also cautious regarding the outlook for the rest of the year with IHS Markit’s Howard Archer saying there is “a strong likelihood that consumer confidence and willingness to buy major items will soften”.

Pinch of salt

Pantheon Macroeconomics’ chief UK economist Samuel Tombs said the strong results “should be taken with a large pinch of salt” as, although the CBI survey did not take into account the Easter weekend, sales numbers were boosted as “consumers typically stock up on food and drink beforehand”.

Tombs added: “The fundamentals continue to point to subdued growth in consumer spending this year. Inflation already is outpacing wage gains.”

While data from the Office for National Statistics showed inflation in March remained unchanged at 2.3 per cent, slightly above the Bank of England’s two per cent target, some experts believe it could rise above three per cent by the end of the year.

Inflation

A separate survey by the British Retail Consortium also released today found inflationary pressures were contributing to a 3.9 per cent drop in full-time employment in the retail sector with food stores experiencing the sharpest drop.

The BRC’s chief executive Helen Dickinson said the figures showed “a continuation of a year-long downward trend of retailers reducing the number of hours being worked”.

“We expect retailers to continue reviewing how they work with their people as they look to address the changing face of retail and keep prices low for consumers,” Dickinson added.

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