Retail sales pick up but firms remain pessimistic about business outlook - CBI quarterly Distributive Trades Survey

Retailers reported solid growth in sales in the year to August and are expecting another firm rise next month, according to the CBI’s latest quarterly Distributive Trades Survey. 

However, sentiment amongst retailers remained gloomy, with firms feeling pessimistic about the business situation over the next three months to the greatest extent since the early phase of the Covid-19 pandemic in May 2020. 

The key survey findings included:

• Year-on-year retail sales grew at the fastest pace in nine months (+37% from -4% in July). Retailers expect another quick rise in sales next month (+31%).
• Sales volumes were considered broadly “average” for the time of year (+3% from -9% in July) and are expected to stay in line with seasonal norms in September (+1%).
• Internet sales continued to fall in comparison to a year ago, but the decline moderated considerable on that seen in recent months (-7% from -37% in July). Internet sales are expected to be flat next month (-3%).
• Firms remained pessimistic about the business situation over the next three months (-22% from -13% in May), to the greatest extent since May 2020.
• Retailers plan to cut back on investment in the next 12 months compared to the previous 12 (-31% from -34% in May).
• Average selling price inflation sped up to its fastest pace since 1985 (+87% from +77% in May). Prices are expected to rise at a similarly quick rate (on a year ago) next month (+87%).
• Employment in retail grew at a moderate pace in the year to August (+13% from 0% in May) and this trend is expected to continue next month (+10%).

Martin Sartorius, Principal Economist at the CBI, said:

“While retail sales returned to solid growth in the year to August, firms remain pessimistic about their business situation over the next three months – to the greatest extent since the first Covid-19 lockdown in 2020. This gloom is reflected in retailers’ investment intentions, which continue to be resolutely negative. 

“Firms now need support from the Government in order to encourage investment and create sustainable growth. Crucially, business rates reform and a more flexible apprenticeship levy will help with dwindling business confidence.”