Retail sales slump eases in February - CBI Distributive Trends Survey

Retail sales in the year to February fell at modest pace following a sharp drop last month, according to the latest quarterly CBI Distributive Trades Survey. This marked the slowest decline in year-on-year sales over the ten-month run of falls so far. Looking ahead, though, sales are set to contract at a somewhat faster pace next month.

Retailers also reported that selling price inflation in the year to February moderated to its lowest since May 2021. Employment in the sector fell again in a run that stretches back six quarters, and firms said that they plan to reduce investment for the eighth consecutive quarterly survey.

The key survey findings included:

• Retail sales fell at a modest pace in the year to February (weighted balance of -7%), following a rapid decline last month (-50% in the year to January). The rate of contraction in February was the slowest in the ten-month period of contraction so far. Retailers expect the decline in sales to pick up somewhat next month (-15%).
• Sales in February were deemed to be in line with average for the time of year (-1% from -47% in January), after having stayed below seasonal norms in the four months prior. Retailers expect sales to be below seasonal averages next month (-9%).
• Internet retail sales in the year to February rose for the first time in eight months (+4% from -54% in January). In contrast to the expected decline in total sales, internet sales are set to grow at a much faster pace next month (+37%).
• Selling price inflation in the year to February moderated to its lowest since mid-2021 (+54% from +73% in November). However, it remained above its long-run average (+42%). Similar annual growth in selling prices is expected next month (+54%).
• Employment in the retail sector in the year to February fell for the sixth successive quarterly survey (-19% from -11% in November), with the decline set to continue next month (-20%).
• Retailers still expect to cut capital spending in the year ahead (-9%), but investment plans were the least negative in their two-year stint of being in the red.

Martin Sartorius, CBI Principal Economist, said:

“The slump in retail activity eased in February following an exceedingly dreary start to the year. Nevertheless, with sales expected to continue falling next month, retailers are still planning to reduce headcount and investment going forward.

Many retailers will expect to see further pressure on their margins due to the upcoming hikes in business rates and the National Living Wage. In the Spring Budget, the Chancellor should aim to cap the increase in the England business rates multiplier and work with the devolved administrations to do the same, which would help retailers return to a path to growth.”