UK retail sales dip in May - CBI

UK retail sales dipped in the year to May following an increase in April, but retailers expect sales volumes to stabilise next month, according to the latest survey from the Confederation of British Industry.

The CBI’s reported sales balance fell to -10 in May from +5 the month before, coming in below consensus expectations of +10.

CBI principal economist Martin Sartorius said: "Retailers continue to face a challenging trading environment, with firms reporting disappointing sales and formidable inflationary pressures. As a result, they are having to cut back on the size of their workforce and investment plans.

"Looking ahead, there are some reasons for retailers to be more optimistic about the outlook. Consumer sentiment has been improving and households’ energy bills are set to decline from July. The resulting boost to incomes should help support retail sales going into in the second half of this year."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the survey suggests that the recent sharp increase in the value of benefits and the resumption of Cost of Living grants to low-income groups in Q2 has not triggered an immediate recovery in retail sales.

"The sales-for-the-time-of-year balance, which is a better guide to the official data than the reported sales balance, fell to a 11-month low of -18 in May, from +21 in April. The sluggishness of sales volumes likely reflects a combination of continued rapid increases in goods prices, the desire by households to rebuild their savings buffer, and some households cutting back in response to the jump in their borrowing costs.

"Looking ahead, the reduction in the energy price cap in July announced by Ofgem today will boost households’ real disposable incomes by 0.8%, and several surveys point to a slowing in the pace of price rises ahead. But with employers hiring only cautiously and most of the hit to disposable incomes from mortgage refinancing still ahead, retail sales volumes probably will be only about 0.8% higher in Q4 than a year ago."