The retail sector cooled off slightly in May following an exceptionally buoyant April. Retail sales were, however, 5.4% up in volume terms on May 2001, still a healthy rate of growth. Overall this year, retail sales are 5.8% up on the same period last year. In 2001, retail sales also grew by a robust 6% per annum.
In many respects, the buoyancy of the retail sector is something of a surprise given the weakness of the economy in general. Low prices and special price promotions continue to boost sales in certain sectors. Clothing and footwear have benefited from big falls in prices, as have computer and audio-visual equipment. Food prices, especially vegetables are also falling quite sharply.
Further evidence of a slowdown is contained in the latest CBI's monthly Distributive Trades Survey. This suggested that retail sales grew at the slowest rate for 18 months in the year to June. Sales expectations for the month ahead have also slipped again.
The findings support the May survey, which suggested a slowdown in the growth of spending, is starting to take effect. Comparing sales with a year earlier, 45% of firms said sales were up while 29% said they were down. The balance of plus-16% in June compares with plus 25 per cent in May and plus 57% in April.
Retailers continue to be optimistic about the month ahead, though this is the second consecutive survey in which sales expectations have not been fulfilled. The balance of plus 16 recorded for sales volumes in June is well below the expected plus-35%. Looking ahead to July, retailers revised expectations downwards. Some 44% of respondents believed sales will improve, 11% said they will decline, giving a balance of plus 33%.
With sales continuing to disappoint, retailers have reduced stocks, with orders placed with suppliers rising at the slowest rate since April 1999. A balance of plus-21% in May compares with only plus-3% in June as retailers ran stocks down to a level that is nearer the long-term average. Stock levels are expected to be run down further over the coming months.
Few retailers recorded acceleration in the rate of sales growth; grocers were the only major exception. Retailers of confectionery, tobacco, newspapers, durable household goods, books and stationery all reported slowing growth, but were still experiencing substantial rises in sales volumes. Firms selling clothing, furniture and carpets reported the sharpest