UK retail sales flat at start of 2019, but growth expected next month

Retail sales volumes in the UK were unchanged in the year to January 2019, according to the latest monthly Distributive Trades Survey by the Confederation of British Industry (CBI).

The survey of 103 firms, of which 42 were retailers, showed that sales volumes for the retail sector stabilised (in line with expectations), following a decline in the previous month. Sales for the time of year remained well below average – to the greatest extent since November 2011 – while orders placed with suppliers rose only slightly.

The outlook for the coming month is better, with retailers expecting sales volumes and orders to rise in the year to February.

Online sales rose at a similar pace to that seen in December 2018, slightly above the long-run average. However, online sales growth is expected to slow in the year to February 2019, to below the long-run average.

Within the retail sector, the majority of subsectors (six out of nine) saw sales volumes fall. In contrast, grocers and non-store retailers reported rising volumes.

Motor traders reported flat sales volumes, with little change expected in the year to February.

Meanwhile, wholesalers reported strong growth in sales volumes, with a similar level of growth expected in the year to February. This month’s survey saw a strong rise in the ratio of stocks to expected sales, with the balance the highest since February 2008. Respondent feedback suggests that this reflects a mix of weaker-than-expected demand and building up stocks in case the UK exits the EU without a deal.

“Companies bracing themselves for a no-deal Brexit”

CBI Chief Economist Rain Newton-Smith commented: “The High Street has had another challenging month, with retail sales volumes flat and well below average for the time year. Pressures on the retail sector remain high, with consumer spending expected to remain fairly subdued and competition fierce.

“There are early signs of companies bracing themselves for a no-deal Brexit: some of our wholesalers are now reporting that they’re building up stocks in case the UK exits the EU without a deal. It’s absolutely vital politicians act immediately to take ‘no deal’ off the table, protect the UK economy and avoid devastating disruption.”

Key findings from the survey

Retailers:

  • 28% of retailers said that sales volumes were up in January on a year ago, while 29% said they were down, giving a rounded balance of 0%. This was in line with expectations (0%), following a fall in December 2018 (-13%).
  • 43% of respondents expect sales volumes to increase next month, while 19% expect a decrease, giving a balance of +24%.
  • 27% of retailers placed more orders with suppliers than they did a year ago, while 23% placed fewer orders, giving a rounded balance of +5%. This was above expectations (-18%). Orders growth is expected to pick up further in the year to February (+22%).
  • 4% of retailers reported that their volume of sales for the time of year were good, while 41% said they were poor, giving a balance of -37% – the lowest since November 2011 (-39%).
  • Internet sales volumes continued to expand at a healthy pace (+47%) and at a similar rate to that seen in the year to December 2018 (+48%). Internet sales growth is expected to slow in the year to February (+33%), to a pace below the long-run average (+47%).
  • Sales volumes fell in the majority of retail subsectors. Clothing (-43%) was the biggest negative contributor to this month’s figure, with footwear and leather (-53%) and hardware and DIY (-40%) also posting large declines in sales volumes. Grocers (+48%) and non-store retailers(+29%) were the only subsectors that saw sales grow.

Wholesalers:

  • 59% of wholesalers reported sales volumes to be up on last year, and 22% said they were down, giving a balance of +37%. Volumes are expected to grow at a broadly similar pace next month (+32%).
  • The volume of orders placed upon suppliers grew at the same pace as in December 2018 (+35%) but is expected to slow in the year to February 2019 (+13%).

Motor traders:

  • 24% of motor traders reported that sales volumes were up on a year ago, while 25% said they were down, giving a balance of -1%. This was substantially below expectations (+40%). Volumes are expected to stay the same next month (-1%).

Is your business under pressure from Brexit uncertainty? For advice on preparing for a no-deal scenario, email me or call me on 020 7099 2621.