Retail sales expectations hit 27-year high

Growth in retail sales volumes picked up strongly in the year to May and expectations for next month are at their highest for 27 years, according to the Confederation of British Industry.

The latest quarterly Distributive Trades Survey shows orders placed upon suppliers rose more quickly than anticipated – at the fastest pace since December 2010 – while sales were well above average for the time of year – to the greatest extent since April 2007.

In a survey of 134 firms, including 63 retailers, 60% of respondents said volumes were up on a year ago, and 9% said they were down, giving a balance of +51%, above expectations of 40%.

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Retailers expect sales volumes to grow again next month, with 63% expecting them to rise and 4% to fall, giving a balance of 58%.

Employment stabilised in the year to May, with a slight pick-up expected next month, while pricing pressures eased with average selling prices rising only moderately. Firms are also more positive about their business situation for the coming quarter, although investment intentions for the year ahead remain in negative territory for the second quarter running.

Internet sales volumes rose again in the year to May. However, the rate of growth eased off slightly on the previous month, and fell back below its long-run average.

Elsewhere, 51% of wholesalers reported sales volumes to be down on last year and 14% said they were down, giving a balance of +36%. Employment growth moderated (+5%) following a year of strong growth, with expectations for further modest growth in June (+8%).

Rain Newton-Smith, CBI director of economics said: “Retailers will be encouraged to see growth in sales and orders on the high street bounding ahead.

“Low inflation, which we expect to remain below 1% for the rest of the year, has given household incomes a much-needed boost and greater spending power.

“Overall the outlook is bright for firms on the high street, but challenges still remain, especially for food retailers, who are still feeling the heat of stiff price competition from new entrants to the sector. And investment plans have also taken a hit.”



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