Retail sales remain below seasonal trends, CBI finds

Retail sales picked up more than expected up until mid-March, the CBI found in a monthly Distributive Trades survey that backed up earlier official figures but did not fill economic experts with much optimism.

The reported sales balance held steady at +9 in March, better than the consensus forecast for a slowdown to +4, as 44% of retailers said sales volumes were up on a year ago, whilst 35% said they were down.

Sales for the time of year were considered to be slightly below seasonal norms, the CBI said, having polled 65 retail groups, 43 wholesalers and 8 motor traders.

There were several negative readings, including a seven-month low balance of -6% saying the volume of sales was low for the time of year.

And while there was a balance of -10% for retailers who placed fewer orders with suppliers than they did a year ago, this is set to rise somewhat next month.

While growth in the volumes of sales was similar to that seen in February it was felt likely to accelerate in the year to April.

Anna Leach, the CBI's head of economic intelligence, was encouraged to see sales volumes growth holding up and expectations strengthened.

"However, retailers continue to be squeezed by rising cost pressures on the one hand, and intense competition on the other, which will limit their ability to raise prices," she said.

"With household spending growth set to slow as inflation rises, retailers seem likely to remain under pressure through this year."

Sam Tombs at Pantheon Macroeconomics said the CBI’s survey only covers the first two weeks of March and it is based on responses from just 65 retailers: "As a result, it could be too downbeat, just as it was consistently last year."

"The flat trend in households’ real incomes suggests that consumer spending will rise only at a meagre pace -- perhaps of just 0.2% quarter-on-quarter -- this year."

Howard Archer at IHS Markit agreed that the CBI hardly points to the stellar March needed to stop overall contraction in retail sales in the first quarter.

"Consumer spending looks certain to make a much reduced contribution to GDP growth in the first quarter - as not only are retail sales volumes likely to have fallen but there have also been signs that consumer spending on services has slowed recently."

He pointed out that Markit's purchasing manager survey indicated that UK services activity moderated to a five-month low in February and found squeezed consumer finances and increased operating costs had acted as a brake on growth.