According to the new CBI Distributive Trades survey high street spending saw a 3-month low in July and expectations are for an even worse August.
The balance of retailers reporting sales higher than a year ago in July was a surprisingly soft 21 percent, some 8 percentage points short of its June reading and even further below the CBI's 33 percent forecast made last time. Moreover, if realised, August's call of just 13 percent would be the third weakest reading since June 2014. Expected orders were softer still, registering a slump of fully 41 percentage points to minus 10 percent.
Actual retail sales were flat on the month in July 2014 so taken at face value the drop in the CBI's annual growth measure should equate with a potentially significant fall in volumes this month. In practice the short-term correlation between the two measures is poor but with the CBI gauge down a cumulative 30 percentage points since May, the omens are not good.
Overall the signs are that consumer demand, probably buoyed in recent months by seasonably warm weather, has, like the temperature, cooled somewhat. A positive contribution from household spending to third quarter GDP growth still looks very likely but today's findings should see the majority of BoE MPC members all the more comfortable with keeping Bank Rate at 0.5 percent for a while longer yet.
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
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