Analysts were surprised to see a slump in UK retail sales in February, according to a report published by the CBI (Confederation of British Industries) on Monday. The net balance of those reporting higher sales volumes than one year ago was just +1%, which was much lower than experts’ predictions averaging +42%.
Thirty percent of retailers said their sales volumes were up on a year, while 29% said they were down (hence a net balance of 1%). It was the lowest positive balance since November 2013.
According to the CBI’s latest quarterly Distributive Trades Survey, retail sales were overall flat in the year to February, while supplier orders declined.
Heavy discounting by grocers seems to be weighing on activity, said Rain Newton-Smith. (Image: CBI)
The survey involving 138 companies, of which 62 were retailers, showed that both retail sales and orders “failed to meet expectations of growth in February, following six months of very buoyant sales.”
Even though the overall mood is optimistic, with the majority of retailers expecting business in March to grow, outlook has moderated considerably from recent highs.
In contrast with the past few months, investment intentions for the next twelve months were negative, while employment compared to one year ago fell.
Prices fell
Average selling prices dropped for the first time since May 2006. Most retailers expect a slight increase in prices next month.
Strong sales volumes were seen in cultural goods and pharmacies, which were offset by weak performances in grocers and department stores.
Despite the decline in headcount, prices and sales, the majority of retailers expect a moderate improvement in their business situation over the next quarter.
CBI Director of Economics, Rain Newton-Smith said:
“After a strong start to the year, retailers were disappointed by the unexpected halt in sales growth. In particular, continually heavy discounting in the grocers sector seems to be weighing on activity.”
“Looking ahead, the outlook for the retail sector is fairly positive, with the boost to household incomes from falling inflation likely to support spending. Indeed, firms remain upbeat about the businesses situation over the coming quarter.”
“However, as this survey shows, overall trading conditions on the high street remain challenging.”
On Friday, the Office for National Statistics reported that retail sales in January had fallen -0.3% versus the previous month, but had risen by 5.4% compared to January 2014.