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."

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Strong carpet and furniture sales boost UK retailers, CBI says

Shops and stores had a better September than expected as the recovering property market affected rest of economy

Sales of furniture and carpets are rising strongly as the impact of Britain's recovering housing market affects the rest of the economy, the CBI has said.

The latest snapshot of retailing from the employers' organisation showed that shops and stores had a better September than anticipated and expect the improved trading environment to continue into October.

The pickup in activity was led by the furniture and carpets sector, where for the first time since 1996 every one of the retailers questioned by the CBI said sales were higher in September than a year earlier.

But the monthly distributive trades survey found that the pickup was broad based, with grocers and retailers selling recreational goods also reporting strong growth in sales volumes.

Overall, 46% of the 111 firms questioned said business was better than in September 2012 while 12% said it was worse. The balance of +34% was the highest since June 2012 and was accompanied by retailers placing more orders with suppliers.

Barry Williams, Asda's chief merchandising officer for food and chairman of the CBI distributive trades survey panel, said: "It's encouraging to see the high street on the road to recovery, with particularly strong growth from furniture and carpet retailers, department stores and recreational goods retailers.

"But the retail sector is not out of the woods yet with consumer confidence still fragile despite the rise in spending."

The CBI reported that 22% of retailers said sales volumes were above average for the time of year, while 10% said they were below average. The balance of +12 points was the highest since December 2010.

David Tinsley, economist at BNP Paribas, said: "The most obvious caveat to reading too much into this survey is that the relatively good result in August was not reflected in the official retail sales data for that month, which fell 1%. Still, the broad momentum of sales appears firm and upwards. And the CBI survey suggests this remains the case."

Richard Lowe, the head of retail and wholesale at Barclays, said: "Retail sales have grown for the third month running, and these strong figures will no doubt provide a fillip for the high street.

"Retailers will now be hoping for more seasonal weather to help sales of new autumn/winter collections and for consumer confidence to tick up as we head towards the crucial Christmas trading period".

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High-street sales lifted by sunshine, sport and summer sales, says CBI

Nearly 50% of UK firms enjoying sales volumes up on year ago, with Aldi and Lidl biggest supermarket winners, finds CBI survey

High-street sales soared due to the sunny weather, British sporting successes and the royal baby, and firms took on more workers at the fastest pace in more than a decade, the Confederation of British Industry claims.

The organisation's monthly distributive trade survey found that nearly half of all businesses said that sales volumes were up on a year ago, with just 22% saying they fell, giving a balance of +27%, the strongest in nine months.

More than one in four retailers added that they expected sales to grow at the same rate next month, suggesting a slow recovery on the high street.

Barry Williams, chairman of the CBI distributive trades survey panel, said: "The feel-good factor from the heatwave, summer sales, royal baby fever and sporting victories, has helped boost the high street. A rise in spending is welcome news, but the bottom line is that confidence will not bounce back fully until family finances improve further."

Lidl's revenues rose by 14.9% from June to Augsut this year.

Growth came from all areas, including clothing, food and recreational goods, while employment in the retail sector is expected to increase, according to the CBI.

In its quarterly survey, the reported employment balance improved to its highest level since May 2002, while the business situation index rose to its highest in three years.

The supposed green shoots come as the UK's third biggest supermarket, Sainsbury's, defied the march of the discount retailersAldi and Lidl as the only one of the big four supermarkets not to lose market share in the last 12 weeks.

Tesco, Asda and Morrisons all lost out, although the UK's fourth biggest supermarket, Morrisons, did manage to stem the tide of recent falls in sales, according to Kantar Worldpanel.

John Coll, director at the retail specialists, said: "Sainsbury's has continued to grow ahead of the market over the past 12 weeks, achieving sales growth of 4.9%. It benefitted from its support of the paralympics last year and its growth has continued since then."

Sainsbury's market share grew to 16.5% from 16.4% last year, while Tesco fell to 30.2% from 30.7%, Asda fell to 17.1% from 17.5%, and Morrisons fell to 11.3% from 11.5%.

However all supermarkets did see an increase in takings, partly due to inflation, but also thanks to the prolonged warm summer.

Ice cream sales soared 21%, sun care products rose 37%, and hay fever remedies also grew 37% over the summer, compared with the same period last year.

The biggest winners, though, continued to be the discounters, as Aldi and Lidl both recorded their biggest market share since entering the UK market in 1989 and 1994 respectively.

Aldi increased its market share from 3% to 3.7% since last year, with takings in the 12 weeks to August 18 soaring 31.9% to nearly £1bn, compared with £660m in the same period in 2012.

Lidl also saw a boost to its market share from 2.8% to 3.1%, with its revenues also up 14.9% to £760m in the 12-week period.

These supermarkets still remain a long way behind the UK's leading store, Tesco, which took £7.4bn over the same period, or £88m a day.

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CBI doubles George Osborne's economic growth forecast

Business lobby group cites growing confidence, forecasting UK growth of 1.2% this year and 2.3% in 2014

The CBI has raised its forecast for UK economic growth this year to 1.2% – double the pace predicted by George Osborne in his March budget – as the business lobbying group cited mounting confidence across the British economy.

It becomes the latest organisation to raise its outlook for the UK after a series of surveys and official data have suggested green shoots of recovery are taking hold, prompting the CBI to raise its 2013 growth estimate from 1%. However, the CBI, which has long been a supporter of the government's austerity drive and promises to cut the deficit, sounded a note of caution as it warned that ministers' push for a rebalancing away from consumption is taking longer than expected.

"The economy has started to gain momentum and confidence is picking up, but it's still early days," said John Cridland, the CBI's director general. "We need to see a full-blown rebalancing of our economy, with stronger business investment and trade before we can call a sustainable recovery. We hope that will begin to emerge next year, as the eurozone starts growing again." Government statistics published today show signs of a rebalancing, or at least the impact of austerity measures on public sector jobs, with private sector employment at its highest in 15 years at 24.1 million people.

The CBI said there were "signs of a pick-up in confidence across a broad range of sectors, including services, construction and manufacturing".

For 2014, the group is now pencilling 2.3% growth, up from May's forecast of 2%. Leading thinktank, the National Institute for Economic and Social Research, and forecasters Fathom Consulting both upgraded their outlook for the UK economy earlier this month to 1.2%. That growth is based on a rise in disposable incomes and some support from exports as the eurozone continues to recover following a protracted recession that was finally confirmed over last week.

Official UK data on Friday is expected to add to the tentatively optimistic tone, confirming economic growth accelerated in the second quarter to 0.6%, double the pace in the first three months of this year. That would be unchanged from the number the Office for National Statistics estimated in its first take on GDP for the quarter, which was welcomed by the chancellor as showing the economy has moved "out of intensive care".

A handful of economists believe growth could be revised higher on Friday to 0.7%. Among them, Philip Shaw at Investec, notes that numbers from the construction sector have been revised up since that first estimate on growth and that the performance of the dominant services is also likely to be nudged up.

"Our 2013 GDP forecast is still +1.2%, but we are tempted to upgrade this modestly given the positive data dynamics recorded recently," he added.

But many economists share the CBI's concern that the economy remains overly dependent on consumers, who account for around two-thirds of all spending. They say consumers are not in a strong position to drive a recovery as they grapple with the biggest squeeze on household budgets for decades.

There is fresh evidence of that pressure on Monday. The latest Asda Income Tracker suggests disposable household incomes fell last month as wages failed to keep pace with living costs.

The supermarket chain says the average UK household had £160 a week of disposable income in July, down £1 a week from a year earlier and £5 a week from a peak in February 2010. It blamed energy bills for burning a hole in household budgets after they rose by 8.2% over the past year.

"A 'feel-good' summer has contributed to a boost in retail sales, but we can't ignore the fact that the squeeze on income growth and rising cost of living continue to pull at consumer purse strings," said Asda chief executive Andy Clarke.

But he noted a rise in consumer optimism, nonetheless. That chimes with a separate survey suggesting households spent more in August as they reported that access to unsecured loans improved and they were relatively upbeat about their finances.

Data company Markit, said the measure of financial wellbeing in its Household Finance Index dipped "only slightly" from July's record high. It stood at 40.8 in August, down from 41.5 in July, the highest since the survey was launch in early 2009.

Still, there were contrasting feelings around the country.

"The strains on finances are receding fastest among those in private sector service jobs, while those working in construction, retail and the public sector trail behind. On a regional basis, familiar trends continued in August as people in Scotland and the south of England were the least downbeat about their finances, while those in Wales and the north of England were among the most pessimistic," said Tim Moore, senior economist at Markit.

Growing evidence of a renewed pick-up in house prices has also boosted sentiment among homeowners but at the same time prompted warnings that Britain could be headed for a damaging property boom and bust.

The CBI's director general, John Cridland, said: 'The economy has started to gain momentum and confidence is picking up, but it's still early days.Property website Rightmove is the latest to report rising house price inflation on Monday, adding to a flurry of recent surveys that reignited criticism of government schemes to kickstart the housing market. Average asking prices are up by more than £20,000 so far in 2013 and stood at £249,199 in August, Rightmove said. As is typical for August, that marked a slight dip from July but at 1.8% the holiday season fall was less than in previous years. In annual terms house price inflation accelerated to 5.5% from 4.8% growth in July.

The average asking price for flats hit a record high of £209,652 in August, Rightmove said, as it joined the chorus of warnings over government schemes.

"Flats are most in demand by first-time buyers and buy-to-let investors and we have seen prices for this property type hit their highest ever level as supply fails to keep up with an increase in demand at the bottom of the market," said Rightmove director Miles Shipside.

"Demand is already on the up, and that's before the roll-out of phase two of the Help to Buy stimulus. It is now critical that the supply of property improves so that the goal of a significant increase in transaction numbers is not over-shadowed by an unsustainable boom in property prices."

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Manufacturers see first rise in new orders for a year

CBI survey finds firms have increased production and employment as outlook improves

Manufacturers started the summer in buoyant mood following the first rise in new orders for a year, according to a survey by the business group the CBI.

Firms increased production and employment as the outlook for the sector improved in the three months to the end of July.

The quarterly industrial trends survey also found that firms anticipated a further modest rise in orders and output in the coming three months, while expectations for growth in new domestic orders were at their highest since April last year.

However, the improving situation, which is also reflected in other surveys of manufacturers, failed to persuade firms to increase investment in new equipment.

The CBI said planned capital expenditure on plant and machinery over the next 12 months had deteriorated slightly. "When asked about factors likely to limit investment, manufacturers most often cited uncertainty about demand, which was of slightly greater concern than usual," the CBI said.

The government has waited several years for a strong boost to investment after a severe slowdown in the wake of the financial crash. But the eurozone crisis and the government's own austerity measures have delayed the expected return of consumer confidence, widely seen as a precursor to a rise in investment spending.

The Office for Budget Responsibility, which monitors the economy for its impact on the government's finances, has pencilled in a recovery in investment over the next two years to underpin a return to average growth levels.

Manufacturers' intentions to invest in plant and machinery dipped -1% compared to -9% in the previous quarter.

he production line at Nissan's factory in Sunderland. The CBI said optimism in the manufacturing sector had risen again.The survey's main total orders balance picked up from -18 in June to -12, which is its strongest level since last December. Striking an even brighter note, 32% of firms reported an increase in total new orders against 27% that said they decreased, giving a balance of +5%.

Samuel Tombs, UK economist at the consultancy Capital Economics, said the sector's recovery was gathering momentum, though at a slower pace than the services sector.

"This improvement brings the CBI's survey in line with the relatively upbeat tone of the other surveys. But with demand for exports weak in the UK's largest market, the eurozone, and domestic consumers' real pay still being squeezed, it is hard to see how the manufacturing sector's recovery can gather much more pace in the near term," he said.

Stephen Gifford, the CBI's director of economics, said manufacturers had seen a pick-up in activity across the board, but agreed there was still a degree of nervousness around the boardroom tables of many firms.

"Optimism in the sector has risen again, and demand conditions are expected to improve further in the coming three months," he said.

"The gentle rise in confidence is being reflected in firms' headcount, which is rising at the fastest rate in a year.

"But manufacturers remain concerned about political and economic conditions abroad limiting export orders, which is likely to reflect heightened uncertainty over the global economic outlook."

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

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