Retailers report surprise dip in sales growth

The survey of 138 firms including 62 retailers showed that both volume of retail sales and orders failed to meet expectations of growth in February, following six months of very buoyant sales. While firms remain optimistic that volumes will grow in March, expectations have moderated significantly from recent highs.

Investment intentions for the year ahead were negative in contrast to the last few months, while employment fell on a year ago. Notably, average selling prices fell for the first time since May 2006, with only a slight rise expected next month.

While sales volumes rose particularly strongly for cultural goods and chemists, this was offset by poorer performances elsewhere – particularly among grocers and department stores.

However, despite the fall in sales, prices and headcount, retailers still expect a moderate improvement in their business situation over the next three months.

Rain Newton-Smith, CBI Director of Economics said: “After a strong start to the year, retailers were disappointed by the unexpected halt in sales growth. In particular, continually heavy discounting in the grocers sector seems to be weighing on activity.

“Looking ahead, the outlook for the retail sector is fairly positive, with the boost to household incomes from falling inflation likely to support spending. Indeed, firms remain upbeat about the businesses situation over the coming quarter.

“However, as this survey shows, overall trading conditions on the high street remain challenging.”