Retail sales stall as high street battles fragile consumer confidence
The UK high street struggled in October, with sales volumes not seen since March's freezing storms kept shoppers at home, data published today showed.
According to the CBI Distributive Trades Survey, 26% of respondents reported a year-on-year increase in sales volumes and 21% saying they were down.
That gave a net balance of +5%, a heavy fall on September’s net balance +23% and well below the consensus of +20%.
Sales volumes were below average for the time of year at -22%, their weakest since March 2018, and are expected to remain below seasonal norms in November.
Sales growth is, however, expected to rebound in the year to November, with 32% of respondents expecting it to rise and 15% predicting it will fall, giving a net balance of +17%.
“The CBI’s survey provides more evidence that consumers have slowed down again after the summer splurge,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
“As ever, the balance should be taken with a large pinch of salt. It is derived from responses from just 45 retailers and covers only the first half of the reference month. Nonetheless the fundamentals – subdued consumer confidence, slowing employment growth and meagre real wage increases – had suggested a pullback in spending was on the cards after an extended run of strength in the second quarter and most of the third quarter.
“As such, the deterioration in the CBI’s survey makes us more confident that quarter-on-quarter growth in retail sales volumes will slow to a mere 0.2% or so in the fourth quarter.”
The CBI data echoes recent hard data from the Office for National Statistics, which showed retail sales volumes had fallen back 0.8% in September after a strong summer.
Howard Archer, chief economic advisor to the EY ITEM Club, said: "October's weak CBI survey fuels suspicion that consumers may be a bit more restrained in their spending in the near term at least, as their purchasing power is still relatively limited while confidence is fragile."
Alpesh Paleja, CBI principal economist, said: “Retail sales have begun to cool as the boost from the summer heatwave and World Cup celebrations fades away.
“It’s clear the challenges facing the retail sector are significant. The double whammy of the sluggish recovery in household incomes and digital disruption is making trading conditions tough and prompting a deeper structural shift in business models.”
Paleja said the Budget, announced on Monday, would help smaller businesses. But he warned that “larger retailers will continue to suffer until there is a full, in-depth review of the business rates regime”.