CBI says Retail Sales Soar in August, Easing Fears of a Slowdown

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The latest CBI quarterly Distributive Trades Survey showed retail sales in the UK grew at the sharpest pace since December 2014 in the year to August, while orders growth hit a survey record high.

Sales were also viewed as above average for the time of year, to the greatest extent since September 2015.

"A ramping-up in retail sales growth in the year to August shows just how much consumer demand continues to spur economic recovery," says Alpesh Paleja, CBI Lead Economist.

The survey of 104 companies, of which 42 were retailers, found that while firms expect orders and sales growth to slow next month, both are ultimately set to remain strong.

The CBI's findings come just days after official retail sales data from the ONS underwhelmed against analyst expectations.

UK retail sales data for July missed the market's expectations by growing 2.4% Year-on-Year whereas the market expected growth of 6.0%, leading some economists to suggest the UK's economic rebound will be less impressive than might have been expected earlier in the year.

But, the CBI's data is more recent than that of the ONS and should go some way in discounting any fears that the UK consumer is in retreat once more.

The CBI reported stock levels in relation to expected sales hit a survey record low across retail and the distribution sector as a whole – marking the fifth consecutive month in which a record low has been reached in distribution sector stock levels.

Within retail, the proportion of deliveries from suppliers accounted for by imports also fell sharply, at one of the fastest rates in the survey’s history.

"There are signs of operational challenges still biting, with stock levels reaching another record low and import penetration falling. Disruption is being exacerbated by continued labour shortages, with many retailers reliant on younger employees currently awaiting their jab," says Paleja.

Average selling prices in August increased at the fastest pace since November 2017, providing further evidence that inflation in the UK is currently running hot.

Respondents expect this picture to remain broadly similar in the month ahead, a sign that the Bank of England's expectations for inflation to peak at around 4.0% is likely to be met.

Despite signs of operational challenges, investment intentions for the next 12 months picked up in the year to August and are now at their strongest since February 1994.

Overall, retailers expect the business situation to improve slightly over the coming quarter.

Elsewhere, sales volumes growth in wholesaling eased in the year to August but stayed above the long-run average.

Motor traders saw a slight acceleration in the pace of sales growth, and both sectors expect another strong rise in sales in the year to September.