The volume of UK retail sales was unchanged on the year for the second month in a row in December 2019, following a period of declining annual sales in the six months up to October. That was the overall finding of the latest Distributive Trades Survey by the Confederation of British Industry (CBI).
Sales volumes were nonetheless seen as poor for the time of year, despite discounting in the run up to Black Friday and Cyber Monday (both of which fell within the survey period this year).
Growth in internet sales slowed for a second consecutive month, with online sales rising at a pace that was well below the long-run average in the year to December.
Although retailers reported that stocks remained too high in December (in relation to expected sales), they made further progress running down inventories following a surge in the stock ratio to a record high in October, ahead of the Brexit deadline.
However, with stocks still flat, orders placed on suppliers fell for the eighth consecutive month in the year to December, though much less steeply than during the summer months.
Retail sales volumes are expected to remain flat in the year to January 2020, while orders placed with suppliers are tipped to fall slightly further.
UK retailers want business rates reform and better transport links
CBI Chief Economist Rain Newton-Smith commented: “Christmas is a critical time for retailers and these figures offer a mixed bag. While stagnating sales volumes in December are hardly something to cheer about, the figures at least provide hope that the recent period of falling sales has passed.
“After a difficult year marked by heightened economic uncertainty and shifting Brexit deadlines, retailers will be looking for a more stable operating environment in 2020. Business rates reform and better transport links to city centres will be at the top of Christmas wish lists for retailers. The new government can and must act swiftly to create the conditions for a revival of business confidence.”
UK wholesalers expect a further decline in sales
Business conditions in other parts of the distribution sector were mixed. Wholesalers reported a fall in sales volumes in the year to December, in keeping with a generally less favourable trend since April this year. Sales were seen as poor for the time of year, stocks too high relative to expected sales and orders placed with suppliers fell for a second consecutive month. Wholesalers expect a further decline in sales in the year to January.
Meanwhile, motor traders reported flat sales in the year to December, with orders placed upon suppliers falling. However, both volumes and orders are expected to grow in the year to January.
According to the CBI’s December economic forecast, UK economic growth looks set to improve gradually from 2020, on the assumption that Brexit uncertainty diminishes and global growth revives. GDP is forecast to grow by 1.2% in 2020 (after estimated growth of 1.3% in 2019). The outlook for 2021 is somewhat brighter, with growth forecast to pick up to 1.8%.
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