Retail sales below average

Retail sales remained down on a year ago in February, dashing hopes of stability after last month's post-Christmas fall, according to the CBI's Quarterly Distributive Trades Survey, published this week. The survey also recorded the sharpest fall in employment in its 22-year history, a result of the poor retail climate through most of the past year. Survey responses show that 40 per cent of retailers said sales volumes were down on a year ago and only 22 per cent said they were up. The negative balance of minus 18 per cent compares with minus 11 in January. A further, more modest decline is expected in the year to March.

Sales were regarded as below average for the time of year, although to a lesser extent than in the previous month. The balance of minus 19 per cent was also significantly less negative than the average for the second half of 2005. Looking ahead, sales are expected to improve in relation to the seasonal average, although remaining below normal.

Business optimism has improved since the last quarterly survey in November, when it was the weakest in the survey's history. Retailers expect the business situation to be broadly stable over the next three months.

Employment in retailing has been on a declining trend for the past two years following several years of expansion, but in the year to February it fell at the sharpest rate in the survey's history. Thirty-seven per cent of firms reported a fall in jobs while only 11 per cent reported a rise. The negative balance of minus 26 per cent compares with minus 15 per cent in November's quarterly survey. Jobs are expected to remain similarly down on a year ago in March.

On a more positive note, prices stabilised in the year to February after falling in the previous five quarterly surveys. Retailers expect prices to remain stable into March. Falling sales led to a reduction in the volume of orders on suppliers. The decline in orders is expected to continue over the year to March, although at a slower rate.