The UK’s retail sales volumes fell for the third consecutive month in the year to August, according to the latest quarterly Distributive Trades Survey by the Confederation of British Industry (CBI). However, the rate of decline slowed compared to July, offering a glimmer of hope for the sector. Despite the improvement, retailers remain cautious, with selling price inflation expected to stay below the long-run average and both investment and hiring plans likely to be scaled back in the coming months.

Retail sales volumes in August fell at a slower pace than in July, with a weighted balance of minus 27 per cent compared to minus 43 per cent the previous month. Looking ahead, retailers anticipate that the sales downturn will ease further in September, with an expected balance of minus 17 per cent. Although sales for the time of year were still reported as ‘poor’ in August, the sentiment was less negative than in July, with a balance of minus 21 per cent compared to minus 36 per cent last month. Expectations for September suggest sales volumes will continue to disappoint, with a forecast balance of minus 18 per cent, as per the survey.

Retailers are also predicting a moderate deterioration in their business situation over the next three months, with a balance of minus 13 per cent, a decline from the 2 per cent reported in May. Selling price inflation in the retail sector accelerated in the year to August, rising to 30 per cent from 20 per cent in May. However, this figure remains below the long-run average rate of 41 per cent. Retailers expect price inflation to ease in September, with a predicted balance of 15 per cent.

Investment in the retail sector is also set to decline, with retailers planning to reduce investment over the next 12 months more significantly than in May, with a balance of minus 35 per cent compared to minus 25 per cent previously. Employment in the retail sector has continued to decline, marking the eighth consecutive quarterly survey to report a reduction in headcount. In the year to August, retail employment fell by a balance of minus 25 per cent, slightly improved from the minus 26 per cent reported in May. The downward trend in retail employment is expected to persist in September, with a forecast balance of minus 28 per cent.

The broader distribution sector, which includes both retail and wholesale, also contracted in the year to August, though at a moderate pace. The total distribution sector saw a decline with a balance of minus 20 per cent, an improvement from minus 30 per cent in July. However, the outlook for September is more positive, with sales expected to decline at a significantly slower rate, with a balance of minus 6 per cent.

The survey also highlighted continued challenges in other areas of the retail sector. Orders placed upon suppliers continued to decline in August at a similar pace to July, with a balance of minus 42 per cent compared to minus 40 per cent the previous month. However, a more moderate decline is expected in September, with a balance of minus 27 per cent. Retailers reported that stock volumes were still ‘too high’ relative to expected sales in August, though less so than in July, with a balance of 14 per cent compared to 32 per cent the previous month. Stock positions are expected to remain firm in September, with a predicted balance of 18 per cent.

Internet sales volumes contracted at a moderate pace in the year to August, with a balance of minus 15 per cent, compared to minus 7 per cent in July. The outlook for September is even more challenging, with a forecast balance of minus 30 per cent. In contrast, wholesale sales volumes fell at a gentler pace in August, with a balance of minus 7 per cent, an improvement from minus 21 per cent in July. A mild recovery is expected in September, with a predicted balance of 6 per cent.

Fibre2Fashion News Desk (DP)