UK retail sales volumes slip in September, CBI says

Retail sales on the UK High Street registered an unexpected fall in September but were expected to recover, according to the results of widely-followed survey.

The Confederation of British Industry's Distributive Trades index declined from +9% in August to -8% in September, below the +3% forecast by retailers themselves last month (consensus: +5%).

Of the retailers polled 38% said sales volumes were up on a year ago, but 38% said they were down, resulting in the balance of -8%.

Sales of clothing, DIY goods and hardware were all above seasonal norms, Rain Newton-Smith, CBI's chief economist, said.

A balance of +7% of companies said sales volumes were "good" for that time of year.

Nevertheless, consumer confidence had taken a hit versus earlier in 2016 and higher prices were expected to weigh on consumers' purchasing power.

Margins were tight and retailers looked set to continue having to face a fiercely competitive environment for some time, Newton-Smith added.

Retail sales volumes look set to grow slightly in the year to October, he said.

Sales volumes dropped markedly for grocers (-29%), specialist food&drink (-34%) and leather (-38%).

The volume of orders placed with suppliers slipped for a sixth month running, disappointing expectations for a bounce back.

Internet sales slowed further in the year to September, although growth was expected in October.

As of 1109 BST the yield on the benchmark 10-year Gilt was down by three basis points to 0.67%.

"The softer CBI distributive trades survey for September could be a sign that consumers are becoming more careful in their spending amid a more uncertain economic outlook following June’s Brexit vote. However, it is premature to come to any firm conclusions," said Dr. Howard Archer, chief European and UK economist at IHS Markit.

"The survey’s narrow scope—September’s survey included just 63 retailers, who reported results only for the first half of the month—means that it might be giving an overly gloomy steer.

"Nonetheless, the CBI’s survey corroborates others produced by the BRC, BDO and Visa, which have indicated that the trend in high street spending has been much weaker than shown by the official figures in recent months," chipped in Samuel Tombs, chief UK economist at Pantheon Macroeconomics.