Retail sales slow in May as inflation bites - CBI

Retail sales slowed in the year to May following strong growth in April, coming in broadly flat as rising inflation takes its toll, according to the Confederation of British Industry's latest monthly Distributive Trades Survey.

The retail sales balance fell to +2 from +38 the month before, hitting its lowest level since January and missing expectations for a smaller drop to +10.

The survey of 117 respondents also found that retailers bumped up prices at the fastest pace in six years, while the proportion of deliveries from suppliers accounted for by imports fell at the fastest pace in eight years.

CBI economist Alpesh Paleja said: "Retail sales flattened out this month, as the bounce in April unwound. It’s clear that households are increasingly feeling the pinch, as rising inflation pushes down on real earnings. Taken together with higher import cost pressures from a weaker pound, this is creating a challenging environment for retailers.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the latest survey indicates that the surge in April was just a one-off. "Admittedly, the CBI’s survey was conducted only up to May 12, so it might be a poor guide to the official data. But April’s 2.3% month-to-month leap in the official measure of retail sales volumes never looked sustainable, because real wages are falling and banks are tightening access to unsecured credit. We doubt, therefore, that the second half of May will be stronger than the first half," he said.