Heatwave boosts UK high street sales, but outlook is less bright

Retail sales in the UK grew at an above-average pace in the year to August 2018. However, the outlook for retail is less positive, with declines in employment, investment intentions, and business optimism. That’s according to the latest Quarterly Distributive Trades Survey by the Confederation of British Industry (CBI).

The survey of 112 firms revealed that yearly retail sales volumes growth accelerated to a pace above the long-run average, and that growth is expected to ease to around its long-run average next month. Meanwhile, orders placed on suppliers fell sharply in the year to August and are expected to continue to decline in September, albeit at a slower rate.

Across the retail sector, growth in sales volumes was primarily driven by grocers, department stores and non-store (i.e. internet and mail order). Sales fell in clothing, furniture and carpets, and hardware and DIY.

Growth in internet sales volumes in the year to August maintained its long-run average pace, and this is expected to continue in September.

Employment in the retail sector declined for the seventh quarter in a row and is expected to fall further next month. Average selling price inflation quickened in the year to August, and prices are expected to rise at a slightly slower – but still noticeably elevated – pace in the year to September. Retailers expect to authorise less investment over the year ahead, and they expect their business situation to worsen over the next three months.

Although the summer months seem to have provided a boost to consumer-facing sectors – including retail – after a weak Q1, the CBI expects momentum to be relatively subdued going forward as firms continue to grapple with anaemic growth in real household earnings and structural changes such as digital disruption and new market entrants.

“Outlook for retail remains challenging”

Anna Leach, CBI Head of Economic Intelligence, commented: “The summer heatwave has kept shoppers out on the high street, with consumers splurging on food and drink for barbecues and garden parties.

“That said, the outlook for retail remains challenging, with orders falling, prices rising, employment sliding, and investment drifting down.

“The long-term challenges facing the retail sector are significant and won’t be resolved overnight. Subdued real wage growth and digital disruption continue to pile pressure on firms, while high-street retailers continue to suffer under an outdated business rates system.”

Key findings from the survey


  • 51% of respondents reported that sales volumes were up on a year ago, while 21% said they were down, giving a rounded balance of +29%.
  • Retailers expect sales volumes to slow next month (+22%), with 43% expecting them to rise and 22% expecting them to fall.
  • Sales were roughly average for the time of year in August, with a balance of -2%.
  • The volume of orders placed upon suppliers fell, with 12% of survey respondents reporting a rise and 31% reporting a fall, giving a balance of -19% – the lowest since last October (-43%). Firms expect that orders will fall less sharply next month (-9%).
  • Retailers expect their overall business situation to deteriorate slightly over the next three months (-8%).
  • For the second quarter in a row, investment spending for the next 12 months is expected to be lower than over the last 12 months (-10%).
  • Average selling price inflation picked up in the year to August (+70%) relative to the year to May (+58%). Price growth is expected to slow slightly, while remaining elevated, in the year to September (+66%).
  • Year-on-year growth in internet sales volumes (+44%) was unchanged from last month.
  • Grocers reported strong sales volumes growth in the year to August (+75%), while growth was also reported in other subsectors such as non-store (i.e. internet and mail order) (+71%) and department stores (+52%).
  • However, there were falling sales in furniture and carpets (-75%) and in hardware and DIY (-60%).


  • 47% of wholesalers reported sales volumes to be up on last year and 29% said they were down, giving a balance of +18%.

Motor traders:

  • 42% of motor traders reported sales volumes to be up on last year and 17% said they were down, giving a balance of +25%.

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