Retail investment intentions lowest in survey history - CBI

Retail sales in the year to May fell at the fastest pace since October 2017, according to the latest quarterly Distributive Trades Survey.

The survey of 90 firms, of which 42 were retailers, also showed that the volume of sales for the time of year were at their poorest since March 2009, but are expected to be broadly in line with seasonal norms next month. Orders placed on suppliers in the year to May also fell, at their fastest pace in 19 months.

Conditions for retailers have further deteriorated with investment intentions for the year ahead reaching their lowest in survey history (since 1983). Employment also fell on a year ago, for the tenth quarter running and at the fastest pace since August 2009. Overall, respondents expect business conditions to remain broadly stable over the next three months, matching expectations in February.

The only sub-sector which posted a rise in sales this month was non-store retailing. Recreational goods sales volumes were flat, whilst the other sub-sectors contracted.

Growth in annual internet sales grew at a slightly faster pace in May, albeit at a rate still below the long-run average. Retailers expect similar growth in internet sales in the year June.

Elsewhere, wholesalers reported a fall in sales for the first time in almost three years. Motor trades also saw the sharpest decrease in sales volumes since December 2011, and are expecting a further decrease in June.

While the economy as a whole saw a strong start to 2019, this was at least in part due to pre-Brexit stockpiling. Business surveys indicate that underlying conditions are more subdued. For more detail on our view of the outlook, see our economic forecast.

Anna Leach, CBI Deputy Chief Economist, said:

“This month’s survey paints a dismal picture of business conditions for retailers, who face a grim combination of tough trading conditions, Brexit uncertainty and a burdensome outdated business rates regime, which have collectively pushed investment intentions to a record low.

“Parliament has one more chance to bring a Brexit deal forward and finally resolve this gridlock. Politicians must lock down a deal as soon as possible, whether through indicative votes or the Withdrawal Agreement. Business and the country need an urgent resolution to this mess.”

Key findings

Retailers

• 26% of respondents reported that sales volumes were up on a year ago in May, while 53% said they were down, giving a balance of -27%
• Retailers expect sales volumes to pick up next month (+7%), with 26% expecting a rise and 19% expecting a fall
• Sales for the time of year were at their poorest since March 2009, with a balance of -40%
• The volume of orders placed on suppliers slumped in the year to May, with 21% of survey respondents reporting an increase and 62% reporting a fall, giving a balance of -41%. Orders are expected to contract again in June albeit at a slower pace (-8%)
• Retailers expect their overall business situation to remain broadly stable over the next three months (+5%)
• Investment intentions for the year ahead weakened to their lowest balance in the survey’s history (-65%), a sharp drop from February (-33%)
• Average selling prices compared to a year ago grew at a faster pace than last quarter (+60%, compared to +48% in February) and are expected to grow at the same pace next quarter.
• Year-on-year internet sales grew at a faster pace (+38%) compared to last month (+28%), albeit with growth still below its long-run average (+47%). Internet sales are expected to grow at a similar pace in June (+36%)
• Non-store retailing was the only positive contributor to this month’s headline figure (+49%) while recreational goods were flat (0%). However, sales fell in other sub-sectors, including footwear & leather (-100%), furniture & carpets (-50%) and hardware & DIY (-25%)

Wholesalers

• 35% of wholesalers reported sales volumes to be up on last year and 41% said they were down, giving a balance of -6%

Motor trades

• 0% of motor traders reported sales volumes to be up on last year and 30% said they were down, giving a balance of -30%