More bad news for retailers from the CBI

Retailers sustained a fall in sales over a snow-affected February, a survey from the CBI showed on Wednesday.

The reported sales balance fell to -8 in March, from +8 in February, the CBI’s latest monthly distributive trades survey showed, well below the consensus forecast for a +7 gain.

Sales for the time of year were significantly below normal and by the greatest extent since April 2013, the CBI said, having surveyed 109 firms, of which 53 are retailers.

Although heavy snow in the month undoubtedly affected sales, the balance of retailers expecting sales to increase over the next month dropped to +16, from +21, and was below its five-year average of +20.

Soft sales were seen at department stores, furniture & carpets, clothing, and other normal goods.

The volume of orders placed with suppliers, meanwhile, was broadly unchanged, while online retail sales slowed sharply in the year to March, with sales rising at the weakest pace since data was recorded in 2009.

“Against a backdrop of stagnating household incomes and weak consumer confidence, the lengthy cold snap earlier this month has heaped added pressure on retailers," said Ben Jones, the CBI's principal economist.

“Freezing conditions and transport disruption caused people to avoid the High Street. With many forced to work from home telecoms firms saw record internet traffic, yet on-line shopping slowed sharply given the potential for disrupted deliveries.

“As winter finally loses its grip, retailers expect a recovery in sales growth in April, albeit a fairly tepid one. While the latest wage and price data point to the first green shoots of a recovery in real household incomes, any gains are likely to be modest, with conditions for retailers likely to remain challenging for some time yet.”

The survey was conducted during the period of bad weather and up to 14 March, so will not have captured any catch-up spending that might have occurred in late March, said economist Sam Tombs at Pantheon Macroeconomics. "Nonetheless, the underlying trend in real sales looks weak too," he said, adding that the CBI’s balance of sales for the time of the year points to year-over-year growth in retail sales volumes, excluding petrol, dropping to about -0.5% in March, from 1.1% in February.

He said weak demand has meant that retailers' inventories have accumulated, putting pressure on retailers to discount.

But he was fairly confident the recent recovery in consumer confidence and the outlook for a return to positive growth in real wages should ensure that retail sales recover in the second quarter.

"But further fiscal austerity, rising credit costs and the recent pick-up in households’ saving intentions suggest that growth in consumers’ spending will remain much weaker this year than during the 2013-to-2016 boom."