August saw retail growth

Retail sales during August exceeded retailers' expectations with the fastest year-on-year growth for twenty months, according to the CBI's Quarterly Distributive Trades Survey published last week. Retail jobs continued to decline in the year to August, but at a far slower rate than the record figure seen three months ago. Positive sales growth will come as welcome news for retailers, who were expecting sales to be only marginally better than a year ago during August.

For the first time in over two years, retailers considered sales to be good for the time of year, indicating that this summer's figures were given a greater-than-average boost by the holiday period. While 33 per cent of retailers surveyed said that sales were down on a year ago, 45 per cent reported sales were up. The positive balance of 12 per cent is the strongest since December 2004 (33%). Expectations are for similar growth in September (13%).

In the face of tough competition, retailers have previously engaged in heavy discounting but - with the rising costs of energy and foodstuffs - they are now starting to increase prices. For the first time in two years, average selling prices rose in August (a balance of 12%) and firms expect them to continue to rise, albeit at a more modest rate. A number of sectors saw sales fall, namely shoe shops and specialist retailers, though Firms are increasingly optimistic about the outlook. A balance of 10 per cent expects the overall business situation will improve over the next three months.

Orders placed with suppliers continue to grow steadily - with a balance of 7 per cent in August - and expectations for September (11%) are their strongest since September 2004 (14%). The share of these orders accounted for by imports rose in August for a balance of 25 per cent of retailers, the highest balance since May 2005.