High street sales grow in run up to festive season

Retail sales grew at their fastest pace in two years, and the high street is expecting growth to pick up further in the run-up to Christmas, the CBI said this week. Its latest Distributive Trades Survey also showed that business sentiment about the retail sector over the coming three months is now positive for the first time since August 2007.

 

Responding to the survey, 40% of retailers said that their volume of sales in the year to November had risen, while 27% said they fell. The resulting balance of +13% reflects a second consecutive month of growth and, while not quite as strong as expected (+19%), it was the highest balance since November 2007 (+13%).

A balance of 19% of retailers expect that, when compared with last December, sales volumes will improve next month in the critical pre-Christmas period.

In light of the growth in sales, the high street is feeling quite optimistic about the outlook for their general business situation. The balance of 13% of firms expecting an improvement over the next three months is the first positive result since August 2007 (+10%) and the strongest since May 2004 (+22%).

The volume of orders placed on suppliers (a balance of 12%) rose for the first time since January 2008 and at the strongest rate since November 2007 (+18%). Only a net 2% of firms said that sales were poor for the time of year, which was somewhat better than predicted (a balance of -7%), while a net 3% expect sales to be above the seasonal norm in December.

The three month moving average of sales volumes, which smoothes out monthly peaks and troughs, turned positive (a balance of +8%) and is expected to grow further in December (+14%). Stock levels fell back slightly from their position in October and a balance of 8% of firms now say that stocks are adequate to meet demand.

Among the survey questions asked on a quarterly basis, a balance of 27% of firms reported that they had reduced their headcount, and the same rate is forecast for December. While this shows that retail employment conditions remain tough, November's result is not as weak as in August (-41%). Negative investment intentions for the year ahead have continued to ease.

Retail prices continued to grow (a balance of +17%) but at a slightly slower rate than firms reported in the last quarterly survey (+23%). Prices are expected to rise at the same pace next month (+17%). Looking at individual retail sectors, footwear & leather retailers reported strong growth in November, while sales fell in the clothing sector.

Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Chief Operating Officer of Asda, said: "It’s reassuring that the high street now has a second month of sales growth behind it, and it looks like December will be even better. A lot of retailers have suffered during 2009, and many are relieved that the year is ending on a more positive note. Despite the more upbeat mood and pre-Christmas sales growth, consumers are still worried about job losses and a weak economy. In 2010 the high street will find that recovery is fragile and slow. Christmas aside, this December will also be busy because shoppers are trying to beat the VAT rise in January, and many retailers are starting to target that behaviour.”

In the wholesale sector sales volumes rose modestly (a balance of +4%), which was the first increase since May 2008 (+50%), while orders on suppliers were cut only slightly. However, sales were below average for the time of year and a balance of 17% expects the wholesaling business situation to worsen in the next three months.

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