Retailers enjoy sales boost from weather in July - CBI

Further survey data emerged to support reports that UK retailers are enjoying the summer, the CBI's Distributive Trades Survey said on Thursday.

Retail sales growth picked up in the year to July, the CBI found, with the average number of retailers reporting higher volumes than in the same month last year.

The survey found 48% of retailers said sales volumes were up in July on a year ago, whilst 26% said they were down, giving a balance of +22%, well up from +12% in June and ahead of the +10% consensus forecast.

Looking to August, 40% of respondents expected sales volumes to increase next month, with 20% expecting a decrease, giving a balance of +20%.

In terms of orders placed, 32% of retailers placed more orders with suppliers than they did a year ago, whilst 22% placed fewer orders, giving a balance of +10%.

Elsewhere in the distribution sector, wholesalers continued to report above-average growth in sales volumes, but motor traders reported the fastest drop in sales since November 2013.

Anna Leach, the CBI's head of economic intelligence, said: “The warm summer has added a sizzle to our high streets as shoppers defied expectations, with sales growth in clothing shops and grocers driving overall performance.

“But while retailers expect a similar pace of growth next month, the factors underpinning their sales growth are more shaky. Although employment is strong, real incomes are falling in the wake of higher inflation, and that’s expected to feed slower consumer spending growth ahead.”

Economist Sam Tombs at Pantheon Macroeconomics said taken at face value, the CBI’s survey is undeniably encouraging, with the reported sales balance is a clear margin above its +11 average of the previous 12 months and the largest majority of retailers since December 2016 expect sales to rise over the next month.

"The survey’s relationship with the official data, however, is weak," he said, noting that July's survey polled 57 retailers, accounting for just one-third of numbers employed in the sector, and did not record the effect of sales in the second half of the month.

"Even if retail sales did pick up in July, consumers likely spent less on services to fund the increase. With real wages still set to fall further and little scope for the saving rate to continue to decline, households’ overall spending will grow only modestly in the second half of 2017."