Economy
Optimism for high street retailers |
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| Economy | |
| Written by Roberta Murray | |
| Thursday, 26 August 2010 | |
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High street sales are up for the second month running, says the CBI. Volumes of sales on the high street were higher than a year ago in August, the second consecutive year-on-year increase, according to the latest CBI quarterly Distributive Trades Survey. Retailers expect sales to continue growing in September and they are more optimistic about the general business situation in the coming three months. These figures come after news this week that consumer "shopaholics" are shopping up a storm of personal debt, despite the recession. The research report published by product comparison website uSwitch earlier this week shows that UK consumers are caught up in recession "shopaholism", amassing nearly £24 billion of unsecured debt. Over half of the retailers surveyed (53 per cent) said that the volume of sales rose during the first two weeks in August while 18 per cent said that it fell, giving a balance of +35 per cent. This was similar to the pace of sales growth in July (+33 per cent), and the fastest since April 2007, though it was slower than expected (+45 per cent). Sub-sectors seeing the strongest growth were: clothing, grocers, durable household goods, footwear & leather, and hardware & DIY. Better weather at the beginning of August, the summer sales and summer holidays are likely to have helped drive sales up in these sectors, the leading business group said. The balance for the underlying trend, the three-monthly moving average of sales volumes, was +21 per cent, which is the strongest figure since July 2007 (+22 per cent). Looking to September, retailers expect sales growth to remain strong, with a balance of +39 per cent expecting volumes to be higher than a year ago. The August Distributive Trades Survey was conducted between 27 July and 11 August, and covered 133 companies. Numbers employed in the retail sector were broadly unchanged in the year to August, the first time since February 2004 a fall in employment has not been recorded in the longer, quarterly survey. Price inflation has accelerated for the third quarter running. In this survey, 66 per cent of firms said average selling prices rose on a year ago, and 9 per cent said they fell, giving a rounded balance of +58 per cent. This is the fastest pace of price increases since February 1992 (66 per cent). Reflecting the recent run of better retail sales, a net 22 per cent of firms expect the overall business situation will improve in the coming three months, with sentiment at its most positive since May 2004 (+22 per cent). Retailers furthermore expect to invest more in the coming year than in the last one, for the first time in six years. With a balance of +32 per cent, firms’ investment intentions are the most positive since February 1994 (+40 per cent). Richard Lowe, Head of Retail and Wholesale for Barclays Corporate (LON:BARC), commented on the data, saying, "The latest data from the CBI - the best in three years - chime, to some extent, with the strength of official data reported by the ONS last week." "However, there are still underlying issues working against retailers which are making conditions pretty challenging for the sector," he said. "Downward pressure on consumer expenditure, rising commodity prices and the impending rise in VAT are all playing on retailers’ minds; although the latter may provide some impetus for sales towards the end of the year," said Lowe. Lai Wah Co, CBI Head of Economic Analysis, said, "Better sales growth continued on the high street in early August, and retailers are upbeat about prospects in the coming three months. The summer sales, some warmer weather and the school holidays will no doubt have helped, lifting sales of clothing and shoes and encouraging households to invest in some home improvements." “Retailers are hopeful that strong sales growth will continue next month. However, the broader outlook for consumer spending is still uncertain, given the VAT rise next year, subdued pay awards and the feed-through of public spending cuts to job losses, said Wah Co. Sales volumes in wholesaling rose in August compared with a year ago, despite expectations they would fall. 41 per cent of wholesalers said the volume of trade was up, while 18 per cent said it was down, giving a balance of +23 per cent. This was far better than the -18 per cent figure expected last month, and a similar growth in volume of sales is predicted in September (+22 per cent). The best performing wholesale sectors mirror those in retail; namely, clothing and food & drink. In the motor trades, sales volumes fell on a year ago for the third month running. The balance of -27 per cent was slightly worse than expected (-23 per cent), and another fall is expected next month (a balance of -21 per cent). |
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