Retailers surge back in September thanks to clothing and grocery bounce

Retail sales volumes bounced back this month are are expected to continue growing but at a slower pace in October, according to the CBI's survey of the sector published on Wednesday.

There was a two-year record balance of 42% of retailers reporting higher sales volumes in September compared with a year ago, which rebounded powerfully from the 10% fall in August and was well above consensus expectations for a sub 10% balance.

Grocery and clothing were the main drivers of volume growth, while furniture and carpet retailers, specialist food and drink stores, and sellers of recreational goods seeing falling sales volumes.

The survey took in responses from 117 firms, of which 55 were retailers, which is why some economists say the survey should be treated cautiously.

Orders placed with suppliers also rose in the year to September, rebounding from a fall in the previous month, while the CBI found continued growth in both sales and orders in the year to October is expected, albeit at a slower pace.

Growth in internet sales volumes rose in the year to September, to slightly above the long-run average, and are expected to expand at a somewhat slower pace in October.

“It’s encouraging to see some vigour returning to the retail sector in September, with sales growth picking up from August and consumer demand expected to hold up reasonably well next month," said Anna Leach, the CBI's head of economic intelligence.

“But inflation continues to squeeze household budgets, and with the pressure on incomes set to persist, retailers will continue to face a challenging environment."

Elsewhere in the distribution sector, wholesalers continued to report above-average growth in sales volumes, which accelerated in the year to September, with growth expected to hold steady in the month ahead.

Meanwhile, motor traders reported rising demand in the year to September, with sales growing at the fastest pace in six months.

However economist Sam Tombs at Pantheon Macroeconomics said the CBI’s reported sales balance "often is a poor guide to the official data" and said the data "should be treated cautiously".

He pointed to the balance in August collapsing to a 14-month low when official data from the Office for National Statistics recording a 1% month-to-month rise in sales volumes.

"The survey is erratic because it includes only 55 retailers reporting whether sales are higher or lower than a year ago solely in the first two weeks of the month," Tombs said, noting that the reported sales balance is not seasonally-adjusted and that just a balance of 13% of retailers reported sales above seasonal norms.

"Meanwhile, with real wages still falling and the threat of an interest rate rise coming in to sharp focus, we doubt that retailers will benefit from strong growth in consumer spending in the crucial final quarter of the year."