UK retail sales have fallen for longest period since 2011

UK retail sales fell for the third consecutive month in the year to July 2019, marking the longest period of decline since 2011. That was the finding of the latest monthly Distributive Trades Survey by the Confederation of British Industry (CBI).

The survey of 93 firms, of which 46 were retailers, showed that sales volumes fell in the year to July, albeit to a lesser extent than in June. Orders placed on suppliers also declined for the third consecutive month, but at a slower pace than the previous month. Both sales and orders are expected to be broadly flat next month.

Grocers were the largest positive contributor to headline sales growth this month, reversing fortunes after a large fall last month. However, this was more than offset by declines in other categories, particularly department stores, clothing and other normal goods (e.g. jewellery, flowers).

Growth in online sales recovered after flattening out in the year to June. However, growth remains below the long-run average, and is expected to edge lower in the year to August.

Wholesalers reported no growth in sales on a year ago, but a small pick-up is expected in the month ahead. Motor traders also saw a third consecutive month of falling sales, with a similar decline expected in August.

Across the economy more broadly, growth has been volatile in the first half of 2019, driven by companies’ stockpiling uncertainties ahead of previous Brexit deadlines. The CBI expects the economy to grow modestly further ahead, although a no-deal Brexit would likely hit activity and financial markets significantly. For more detail, see the CBI’s July 2019 economic forecast.

“UK economy has reached a fork in the road”

CBI Chief Economist Rain Newton-Smith commented: “While last year’s summer strength in retail sales is driving some of the comparative weakness this year, it is still hugely concerning that sales have fallen for the longest period in almost eight years. Despite the recent pick-up we’ve seen in households’ real earnings, the sun is clearly not shining on the British High Street.

“The UK economy has reached a fork in the road. The new Prime Minister must now do everything in his power to achieve a good Brexit deal, thus protecting jobs and our economy.”

Key findings from the survey

Retailers:

  • 26% of retailers said that sales volumes were up in July on a year ago, while 42% said they were down, giving a balance of -16%. The drop was less sharp than in May (-27%) and June (-42%).
  • 27% of respondents expect sales volumes to increase next month, while 29% expect a decrease, giving a rounded balance of -3%.
  • 25% of retailers placed more orders with suppliers than they did a year ago, while 43% placed fewer orders, giving a rounded balance of -19%. This was a less severe fall than the previous month (-33%).
  • 25% of retailers reported that their volume of sales for the time of year were good, while 45% said they were poor, giving a balance of -20%.
  • Internet sales growth picked up (+39%) on the previous month (+3%), but remained below the long-run average (+46%). Internet sales growth is expected to ease slightly in the year to August (+35%).

Wholesalers:

  • 30% of wholesalers reported sales volumes to be up on last year, and 31% said they were down, giving a rounded balance of 0%. Volumes are expected to improve slightly next month (+8%).
  • Orders placed upon suppliers fell (-13%) for the sixth consecutive month, but are expected to stabilise in the month ahead (+3%).

Motor traders:

  • 8% of motor traders reported that sales volumes were up on a year ago, while 28% said they were down, giving a balance of -20%. Volumes are expected to fall at a similar rate next month (-20%).
  • Orders placed upon suppliers fell for the third consecutive month (-14%).

For advice on preparing your business for a possible no-deal Brexit, email me or call me on 020 7099 2621.