Retailers expect the sharpest deterioration in business conditions since February 2009 in the coming months, according to the latest quarterly Distributive Trades Survey from the CBI.
Retail sales volumes and orders both fell at their fastest rate since December 2008 in the year to August. 10% of respondents to the CBI survey reported that sales volumes were up on a year ago this month, while 58% said they were down, giving a balance of -49%. This compares to a balance of -16 in July and represents the second weakest reading since records began nearly 40 years ago.
However, the CBI highlighted that August sales were only slightly below average for the time of year, and to the least extent in four months.
Meanwhile, the survey revealed that conditions have further deteriorated, with investment intentions for the year ahead staying negative for the sixth consecutive quarter, albeit to the least extent over this year so far. Employment also fell for the eleventh straight quarter in August.
Within the sub-sectors, only non-store retailing posted a rise in sales, while volumes dropped across most other sectors, including in grocers, clothing and hardware & DIY.
Internet sales growth remained below its long-run average, with the rise similar to last month, and the same pace of growth expected to continue next month. Stock levels compared to expected sales spiked higher, matching the survey record high seen in November 2014.
Anna Leach, CBI Deputy Chief Economist, commented: “Sentiment is crumbling among retailers, and unexpectedly weak sales have led to a large overhang of stocks. With investment intentions for the year ahead and employment down, retailers expect a chilly few months ahead.
“It is unsurprising that business confidence has deteriorated sharply, with a potential no-deal Brexit on the horizon. But retailers are also buckling under the cumulative burden of costs, including an outdated business rates system and the apprenticeship levy. Businesses will be looking for government action at the Budget in the coming months to alleviate some of these pressures.”
NAM Implications:
- Experienced retailers will not bother to hold breath re budget relief.
- Pragmatists will optimise the current situation while others ‘wait & see’
- Now is the time for NAMs to hone their sensitivity to pragmatism!
