Retail sales ramp up as expectations hit 27 year high

Orders placed upon suppliers also rose more quickly than anticipated – at the fastest pace since December 2010 – while sales were well above average for the time of year – to the greatest extent since April 2007. The survey showed that growth in both the volume of retail sales and orders exceeded expectations in May. Firms remain optimistic that both sales and orders are set to rise at an even stronger pace in the year to June.

Most retail sub-sectors reported robust growth in sales volumes including grocers and non-specialised stores, which rebounded from negative showings in the previous month to report strong performances.

After some weakness in the sector around the turn of the year, there are further signs of improvement. Employment stabilised in the year to May, with a slight pick-up expected next month, while pricing pressures eased with average selling prices rising only moderately. Firms are also more positive about their business situation for the coming quarter, although investment intentions for the year ahead remain in negative territory for the second quarter running.

Rain Newton-Smith, CBI Director of Economics said: “Retailers will be encouraged to see growth in sales and orders on the high street bounding ahead.

“Low inflation, which we expect to remain below 1% for the rest of the year, has given household incomes a much-needed boost and greater spending power.

“Overall the outlook is bright for firms on the high street, but challenges still remain, especially for food retailers, who are still feeling the heat of stiff price competition from new entrants to the sector. And investment plans have also taken a hit.”

Internet sales volumes rose firmly again in the year to May. However the rate of growth eased off slightly on the previous month, and fell back below its long-run average. Both wholesales and motor trades sales volumes grew strongly in the year to May and ahead of expectations.