Retail sales return to growth in July - CBI

Retail sales rose a little in July after non-essential shops were allowed to reopen following the Covid-19 lockdown, but sales are expected to dip next month, according to a survey from the Confederation of British Industry.

The balance of retailers reporting year-on-year growth in sales rose to +4 from -37 in June, coming in ahead of expectations for a balance of -25. Although this was only slight growth on the year, it marked the best level since April 2019.

The improvement was driven mainly by stronger grocery sales, while sales of hardware & DIY products and other goods such as cards, flowers and stationary, returned to growth.

Although most other retailers continued to report significant declines, in some cases the falls were less severe than in recent months. Overall, sales are expected to drop slightly in the year to August.

CBI chief economist Rain Newton-Smith said: "It’s great to see retail sales stabilise this month, but this doesn’t tell the whole story. This crisis has created winners and losers within the retail sector and for some businesses the picture remains bleak.

"The re-opening of non-essential retail was a vital step towards recovery but isn’t a cure-all. The Government has provided critical support for firms and jobs throughout the crisis. But ongoing financial pressures are a major challenge for some retailers, and additional direct support to shore up cash flow, such as extension of business rates relief, should be considered."

Wholesalers reported the fourth consecutive month of falling sales and orders, albeit at a slower pace than June, while motor traders reported growth in sales in the year to July but said they expect a return to negative territory next month.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the survey was "old news" and simply mirrors the official data for June in showing that retail sales recently have recovered to pre-Covid levels.

"The CBI’s survey was conducted between June 26 and July 15, so it overlaps substantially with June's official data, which covered the five-week period to July 4. Looking ahead, retailers expect demand to weaken marginally, with a net balance of -5 anticipating that sales will be higher in August than a year ago. Real-time data, however, suggest that retail sales already have dropped back considerably, now that most consumer services providers have reopened for business and pent-up demand for durable goods has been satiated."