GB: CBI Distributive Trades

Mon Feb 23 05:00:00 CST 2015

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According to the CBI retail sales were surprisingly sluggish this month. At just 1 percent, the balance of respondents reporting a rise in volumes from a year ago was well short of market expectations, even further below the CBIs' own forecast made last month and at its weakest level since November 2013.

The expected sales measure shows a rebound to 27 percent in March but with February's sales for the time of year down 14 percentage points at minus 5 percent and orders off 9 percentage points at minus 7 percent, last month's findings are not at all good news for the retail sector. That said, the sharp drop in the headline index needs to be seen in the context of a particularly strong 1.2 percent monthly gain in officially measured sales in February 2014. As such, it is quite possible for a decline in the CBI's annual growth measure to accommodate a monthly increase in actual volumes. Moreover, the monthly correlation between the actual and survey data is not high.

Even so, today's findings are worrying since retailers are already squeezing profit margins hard through heavy discounting in a bid to support demand. The ONS reported a monthly decline in actual sales in January and there cannot be much room left for prices to be reduced further.

This survey was first introduced in 1983 and is an indicator of short-term trends in the UK retail and wholesale distribution sector. The quarterly and monthly surveys both cover volume of sales, orders on suppliers, sales for the time of year and stocks, while the quarterly survey also covers imports, selling prices, numbers employed, investment and business situation. Both monthly and quarterly surveys now contain questions on current and expected internet sales and average prices for internet goods.

This survey is a leading indicator of consumer spending because retailer and wholesaler sales are directly influenced by consumer buying levels. The monthly update provides a vital update on volume of sales, orders and stocks. Like the industrial survey, it carries significant weight in the formulation of economic policy at the Bank of England and within government as a highly respected barometer of high street trade. It is considered to be an advance indicator of retail sales although it is not well correlated with the official data on a monthly basis.

Monthly and quarterly