Retailers see fastest drop in sales since Financial Crisis - CBI

The survey of 88 firms, including 45 retailers, judged sales for the time of year to be below average, although to a lesser degree than in May.

Within the retail sector, grocers were the largest contributors to the fall in sales volumes, with the hardware & DIY and footwear & leather sub-sectors also reporting declines. Notably, the only sub-sector to see rising sales this month was non-store (i.e. internet and mail order) retailers.

But internet sales across the retail sector stalled in the year to June, marking the weakest growth since the question was first introduced to the survey (in 2009). Internet sales growth is expected to pick up next month, albeit at a pace well below the long-run average.

Recent data suggests UK economic growth has slowed noticeably in the second quarter of 2019, as the boost from stockpiling activities in Q1 fades. We expect the UK to return to a subdued growth path further ahead, although risks from Brexit uncertainty and global trade tensions remain heightened. For more detail on our view of the outlook, see our economic forecast.

Alpesh Paleja, CBI Principal Economist said:

“This month’s drop in sales should be taken with a pinch of salt, given the backdrop of last June’s heatwave and the start of the World Cup. But even accounting for both factors, underlying conditions on the High Street remain challenging. Retailers are having to continually compete for the attention of value-conscious shoppers, in the age of digital disruption.

“The new Prime Minister must help support retailers by reducing the high cumulative burden of costs they face. This should start by urgently reviewing the dire business rates system, which is unfairly impacting UK high streets and deterring much needed investment.”

Key findings

Retailers:

• 16% of retailers said that sales volumes were up in June on a year ago, whilst 58% said they were down, giving a weighted balance of -42%.
• 16% of respondents expect sales volumes to increase next month, whilst 27% expect a decrease, giving a balance of -11%
• 15% of retailers placed more orders with suppliers than they did a year ago, whilst 48% placed fewer orders, giving a balance of -33%.
• 26% of retailers reported that their volume of sales for the time of year were good, whilst 45% said they were poor, giving a balance of -19%
• Internet sales were broadly flat on a year ago (+3%), following growth in the previous month (+38%). Internet sales growth is expected to pick up in the year to July (+23%), but remain weaker than the long-run average (+46%)

Wholesalers:

• 31% of wholesalers reported sales volumes to be up on last year, and 22% said they were down, giving a balance of +9%. Volumes are expected to fall slightly next month (-4%)
• Orders placed upon suppliers fell (-10%), with a slower decline expected in the year to July (-4%).

Motor traders:

• 10% of motor traders reported sales volumes were up on a year ago, whilst 51% said they were down, giving a balance of -41%. Volumes are expected to be broadly flat next month (-3%).