GB: CBI Distributive Trades

July 27, 2016 05:00 CDT

Consensus Actual Previous
Level 1 -14 4

The CBI paints a bleak and weaker than expected picture of high street sales in July. At minus 14 percent, the balance of respondents reporting an increase in volume sales versus a year ago was down 18 percentage points from its June reading and at its lowest level since January 2012. Retailers forecast just a partial retracement to minus 10 percent in August.

Grocers together with furniture and carpet stores led the decline and even more worryingly, the survey's forward looking elements were weaker still. In particular, orders placed with suppliers slumped 19 percentage points to minus 34 percent, their worst reading since March 2009. A further decline is anticipated next month.

Today's survey covers the period from 28th June to 14th July and so fully reflects reaction to the Brexit vote. Chances are that the results are overly pessimistic and in part just reflect a kneejerk response to the referendum's unexpected outcome. Nonetheless, the signs are that UK retailers are in for a rough ride over the next few months. If so, this will greatly restrict their ability to raise prices should costs climb on the back of the slide in the pound. In turn, this should the increase the scope for the BoE MPC to cut interest rates next month.

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