High street spending continued to grow in the first half of August, but at the slowest rate since last November, as sales growth and price increases fell back from their spring peaks to their long-run averages, the CBI said today (Thursday).
In its snapshot of the high street, the business group revealed that 42 per cent of retailers said year-on-year sales volumes were up in August, while 26 per cent said they were down. The rounded balance of +15 per cent was in line with expectations but was the lowest balance since November 2006 (-9 per cent).
The three month moving average of sales volumes, which smooths out monthly peaks and troughs, fell to a balance of +17 per cent, slowing continuously since the May peak. And the volumes of sales for the time of year were considered below average by a balance of 7 per cent of respondents. Looking ahead, retailers expect sales growth to continue at a similar rate in September.
The slowing in high street demand has meant retailers are less able to push up prices. A balance of +16 per cent reported putting up the prices of their goods compared to a year ago - weaker than the 9 year high of +33 per cent seen in May, but back in line with its long-run average. A balance of +12 per cent expects to raise average selling prices in the coming month, indicating that price inflation in the retail sector is softening.
The slower sales growth, down from the stronger rates seen between March and May, and the less strident pricing power both suggest that interest rate rises are working through to the high street, where the appetite for big ticket items like durable household goods has remained weaker than last year.
However, the retail sector is showing some positive signs. The balance of firms planning to invest more over the year ahead than in the previous year, though still modestly negative, is at its highest (-1 per cent) for over two years. Retailers are also more upbeat about the medium term than they have been in a year, with a balance of +9 per cent expecting the business situation to improve over the next three months. Employment continued to fall, but at a modest rate.
The Quarterly Distributive Trades Survey ran from July 31 to August 15, gauging conditions in some 158 businesses, including most of the UK's biggest high-street chains, and representing 20,000 outlets and 40 per cent of retail jobs.