UK retailers suffer sharp slowdown in sales, says CBI

Retail sales ground to a halt at the start of October – coming in well below City forecasts

Retailers suffered a sharp slowdown in sales this month, according to an industry survey that has cast doubt on the pace of the wider UK economic recovery.

After a strong run of growth, sales ground to a halt at the start of October and came in well below City forecasts, the CBI business group said.

The main sales balance in its monthly survey came in at +2, down sharply from +34 recorded in September and much lower than +33 forecast by economists in a Reuters poll.

The balance, which is the difference between the percentage of retailers reporting an increase and those reporting a decrease in sales, was the weakest since June and breaks a three-month run of strong sales growth.

Some economists said the slowdown underlined the pressures on households as lacklustre pay growth fails to match rises in living costs. If consumer demand remains weak, economic growth in the final three months of the year may fail to match the 0.8% reported for the third quarter in official figures last week.

But the CBI and other analysts said there were signs sales would soon bounce back. In particular, the business group emphasised that a majority of retailers were placing bigger orders with their suppliers.

Barry Williams, from Asda and chair of the CBI's survey panel, said: "Although the high street recovery stalled this month, there is optimism that it was just a blip on the previous run of three months' growth. Retailers expect sales to pick up next month."

For October, most sub-sectors saw sales growth slow, the CBI said. In particular, grocers saw the first year-on-year fall in sales volumes in eight months but there were some areas that enjoyed stronger trade.

"Signs are pointing towards increased consumer confidence – backed up by continuing growth in certain areas such as furniture and carpets; recreational goods; footwear and leather – all did particularly well in October," added Williams.

James Knightley, economist at ING Financial Markets suggested the surprise collapse in this month's sales balance was weather related.

"October has been far warmer than usual and as such demand for autumn/winter clothing has been very weak. As temperatures drop we should see demand for these items strengthen. In any case consumer confidence continues to strengthen while the pickup in the housing market appears to be supporting furniture and carpet sales," he said.

Howard Archer, an economist at IHS Global Insight, said the survey underlined the pressure on consumers, who are "taking at least a temporary breather".

"The survey fuels suspicion that GDP growth is likely to moderate in the fourth quarter from the robust 0.8% quarter-on-quarter expansion seen in the third quarter.

"With purchasing power currently being limited by consumer price inflation running well above earnings growth, it is likely that many people are feeling the need to rein in their spending at least temporarily, particularly if they want to build up their funds for spending over the Christmas period."

Article Source : http://www.guardian.co.uk
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