Retail sales drop at fastest pace since financial crisis - CBI
Retail sales in the UK fell at their fastest pace since March 2009 in the year to June, with bad weather partly to blame, according to the latest data from the Confederation of British Industry.
The balance of retailers reporting year-on-year growth in sales volumes came in at -42% from -27% in May. Analysts had been expecting a reading of -10%.
The CBI said it was worth noting that the yearly drop in sales volumes was likely driven in part by the heatwave-induced boost to retail sales growth in June last year.
Grocers were the biggest contributors to the contraction in sales volumes, with a smaller contribution from the hardware & DIY and footwear and leather sub-sectors. The only sub-sector to see a positive sales growth balance was non-store, i.e. internet and mail order retailing.
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.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the decline in the reported sales balance "is not a convincing sign of an emerging consumer downturn".
"The balance has become increasingly erratic over the last few months and it has been consistently too downbeat relative to the official data. This might reflect the survey’s dwindling sample size; June’s survey was comprised of responses from only 45 retailers, about 10% fewer than normal. In addition, the main balance reflects whether sales were higher or lower than a year ago; sales surged in June 2018 in response to the summer heatwave and the World Cup.
"The less erratic sales-for-the-time-of-year balance rose to -19 in June, from -40 in May, though it remained below its 12-month average, -7. Fundamentally, it would be extremely odd if a consumer downturn materialised now, just when wage growth has picked up to a 11-year high, the income tax personal allowance has risen by the most for five years, and consumers’ confidence has begun to recover from Brexit-related misery in Q1. Accordingly, we still stand by our view that solid growth in households’ spending will ensure that GDP growth recovers back to its trend rate of about 0.4% quarter-on-quarter in Q3, following the stockpiling-induced slowdown in Q2."