Retail volumes inch higher in May but likely to fall in June, CBI finds

UK reported retail sales volumes returned to modest growth in May, according to a survey by the Confederation for British Industry (CBI), but orders have dropped sharply and volumes are expected to fall again next month.

The percentage of retailers who said sales volumes were higher in May compared to a year ago rose to 36%, while 29% said volumes were down, giving a balance of +7% that was better than the previous month’s balance of -13% but short of expectations of +9%.

As 26% of respondents to the CBI survey expect sales volumes to decrease next month, this outweighed the 21% who expect an increase by a balance of -5% and was the lowest for three years.

The survey of 121 firms, of which 60 were retailers, also showed orders placed on suppliers fell sharply over the year, at their fastest since March 2009.

Only 11% of retailers placed more orders with suppliers than they did a year ago, overshadowed by the 43% which placed fewer orders, giving a rounded balance of -31%.

“A bit like the start of the British summer, it’s been a mixed bag for the retail sector this month," said Rain Newton-Smith, CBI director of economics. "Whilst sales have risen a little, they are expected to fall again next month, and orders have dropped sharply."

She added that even though low inflation was still making pay packets go further, retailers were continuing to operate in a tough environment as they engage in strong price competition that squeeze margins.

“With a cloud of uncertainty hanging overhead, particularly from challenging global conditions and the outcome of the EU referendum, it’s not surprising to see investment intentions deteriorating and business sentiment levelling off,” Newton-Smith said.

Internet sales volumes grew markedly on the previous month, the CBI found, outstripping expectations, although growth is expected to fall slightly in June.

Meanwhile, wholesaling saw continued growth in sales volumes, and motor trades reported better than expected growth.