Following a disappointing Christmas trading period, data from the CBI’s Distributive Trades Survey suggests retail sales volumes were flat for the third consecutive month in January with no growth expected next month.
Retailers told the business organisation that sales were poor for the time of year, but to a lesser degree than in December. They are expected to remain below seasonal norms in the year to February.
Stock levels in relation to sales rose above the long-run average in the year to January. Concurrently, orders placed with suppliers fell, with the pace of decline accelerating from December and retailers expecting a further fall next month.
Sales performance varied across the retail sector. In contrast to flat overall sales volumes, growth in internet sales picked up and is expected to accelerate slightly further next month.
By sub-sector, the biggest positive contribution to volumes growth came from non-specialised stores (i.e. department stores). This was offset by negative contributions from retailers of non-food goods such as jewellery, household furniture, and hardware.
Anna Leach, CBI Deputy Chief Economist, comment: “Both official data and business surveys are painting a picture of subdued activity for retailers. A challenging Christmas has extended into the New Year, with little expectation of any improvement soon.
“2020 looks set to be another tough year for the sector as growth in households’ disposable income is set to remain modest and retailers continue to battle longer-term issues such as digital disruption and the cumulative burden of policy costs. The upcoming Budget provides an opportunity for the Chancellor to support retailers, primarily by fixing the broken business rates system.”
Stagnating retail sales will be a key factor in the Bank of England’s decision on whether to cut interest rates on Thursday to encourage spending.
NAM Implications:
- Despite BRINO (Brexit in name only) assurances…
- …people are still running scared…
- …and have become savvy buyers.
- Best for suppliers and retailers to acknowledge this fact…
- …and take appropriate action:
- i.e. rationalise assortments and SKUs to a point where the offering represents real need of consumers…
- …and then give them more than it says on the tin.
- All else is detail.
