December brings festive season lull on high streets

The festive season has unfortunately brought with it a lull in high street shopping, according to the Confederation of British Industry (CBI).

Responding to the CBI’s latest monthly Distributive Trades Survey during the first two weeks of December, 36 per cent of retailers reported an increase in volume of sales compared to a year ago, and 17 per cent a decrease.

The resulting balance of +19 per cent, though broadly in line with the long-run average (+21 per cent), matched neither the stronger increases in sales volumes seen in the previous two months (+30 and +33 per cent), nor retailers’ expectations (+25 per cent).

As a result, retailers considered sales volumes to be below average for the time of year (-18 per cent), disappointing expectations that they would be in line with seasonal norms (-1 per cent).

In contrast to slowing sales growth, orders placed by retailers upon suppliers rose (+13 per cent) at a similar pace to last month year-on-year (+16 per cent).

Sales growth is expected to continue losing steam next month, with retailers expecting a slower rise once again in the year to January (+10 per cent), while orders placed on suppliers are expected to be flat in the coming month (0 per cent).

Stocks levels fell back relative to expected demand (+9 per cent), with stock adequacy at its lowest in three months. A similar degree of stock sufficiency is expected next month (+10 per cent). Looking in more detail at the retail sectors, grocers recorded their eighth consecutive month of rising year-on-year sales (+42 per cent); clothing also saw sales growth pick up (+39 per cent); while shops selling footwear and leather saw falling sales (-9 per cent) for the second month running.

Anna Leach, CBI head of economic analysis, said: “This month’s survey hasn’t quite provided the Christmas cheer that retailers anticipated, with sales growth falling short of expectations. “Clearly, weak spending power and uncertainty over the economic outlook are likely to remain key risks to the retail sector in 2013.”

Judith McKenna, chair of the CBI Distributive Trades Panel and Asda chief operating officer, said: “This latest data covers the period to the middle of December and we should take heart that sales on the high street have held up during the early crucial Christmas shopping period.

“However, on-going economic fragility is maintaining the squeeze on household incomes, and it’s notable that sales are below par for the festive season.

“So while families are making their budget stretch as far as possible for the Christmas season, the Christmas spending spirit can only go so far. In reality, sales growth has actually slowed since the autumn and retailers are expecting a further slowdown in the New Year.”

This month, the wholesale sector saw its fastest year-on-year sales growth (+53 per cent) since September 2007 (+67 per cent), greatly exceeding wholesalers’ expectations of broadly flat growth (+3 per cent). A further, but more modest rise in sales is expected in the month ahead (+12 per cent).

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