Retail sales cool unexpectedly in August

UK retail sales growth slowed in August at the fastest pace in more than a year as higher inflation continues to squeeze consumers’ pockets.

The latest quarterly CBI Distributive Trades Survey showed that in the year to August, the volume of sales fell at the fastest pace since July 2016, with orders placed on suppliers also falling considerably year-on-year.

Overall, sales for the time of year were considered to be below seasonal norms to the greatest extent since October 2014.

Looking ahead to next month, retailers expect sales volumes to rebound in the year to September, while orders are expected to stabilise.

Within the retail sector, grocers saw stable sales on the year, following strong growth last month, and footwear and leather performed well, whilst specialist food and drink stores reported another month of significantly falling sales.

Year-on-year internet sales growth slowed, edging further below the long-run average, but growth is expected to pick up next month.

Meanwhile, wholesaling saw growth in sales volumes slow in the year to August, while motor trades reported sales rising on a year ago, but at a pace below expectations. Both retailers and wholesalers anticipate firm sales growth in the year to September.

The quarterly survey showed that employment declined in the retail sector in the year to August, at the fastest pace since August 2009, with a similar reduction in headcount expected next month. Retailers expect the business situation to continue to deteriorate over the next three months for the third quarter in a row.

However, investment intentions for the year ahead were mildly positive following two quarters of contraction. Meanwhile, average selling prices continued to rise strongly, although at a somewhat slower pace in the year to August.

Anna Leach, CBI head of economic intelligence, said: “Despite the warmer weather at the start of the month, retail sales have cooled as higher inflation continues to squeeze consumers’ pockets. Meanwhile, deteriorating sentiment regarding the business situation has combined with falling headcount among retailers.

“Looking ahead, firms do expect sales growth to recover, but the pressures on household budgets are set to persist, given little sign of wages picking up.”