A wet August and disappointing summer sales have compounded the deepening problems on the High Street, where sales have continued to fall sharply and jobs have been hit, the CBI said on Thursday. It was the second month of sharp falls in sales volumes and, with a similar drop expected in September, business confidence is very weak. Growth in average selling prices has eased back from a 16 year high, but remains strong.
Sixty per cent of respondents to the latest CBI Distributive Trades Survey said that sales in the first half of August were lower than a year ago, while 13% said they were up.
The resulting rounded balance of -46% was worse than anticipated (-32%) and the weakest since the survey began in 1983 – although changes in answering practices over the past 25 years diminish this comparison (see notes).
The three-month moving average of sales volumes, which smoothes out monthly volatility, continued to decline, and the balance of -30% was a survey low. Sales for the time of year were reported as poor by a net 43% of retailers.
The weak demand has fed through to the volume of orders placed with suppliers, and a balance of 56% reporting a fall in orders was worse than expected (-32%) and marks a survey record low.
The rate of growth of average selling prices edged back over the year to August from the previous quarterly survey’s 16 year high. However, the balance of 48% that reported price rises is well above the long-run average, and the expectation for September is similar (+42%).
Confidence in the sector has also taken another hit. A balance of 38% of firms expects the retail business situation to worsen over the next three months and this has dampened investment intentions which have also dropped – a balance of -34% is much weaker than the historical average.
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Looking at individual sectors, retail sales were weak across most businesses, footwear & leather retailers saw sales decline for the first time this year.
Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Retail Director of Asda, said: “This has been a summer that many retailers would rather forget. The downturn in the housing market is continuing to depress sales for those shops selling big-ticket items.
Ian McCafferty, CBI Chief Economic Adviser, said: “Retail conditions have been extremely tough this summer, and the wet August has been a further blow. Sadly, no let up is expected as we head into early autumn. The business outlook is particularly weak and retailers are having to scale back their employment and investment plans in an attempt to ride out the storm.”
Sales volumes in the wholesale sector fell sharply over the year to August (a balance of -29%) and average selling prices grew strongly (+62%). These trends are expected to continue in September. The drop in sales was particularly marked among builders’ merchants and those selling durable household goods.
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