GB: CBI Distributive Trades

Thu Aug 24 05:00:00 CDT 2017

Consensus Actual Previous
Level 16.0 -10 22

The CBI's new Distributive Trades Survey points to a surprisingly weak month for high street sales. At minus 10, the balance of respondents reporting an increase in volume sales from a year ago was down 32 percentage points from July's outturn and much lower than either the survey's prior expected balance of 20 or the pre-release consensus estimate of 16. It is the weakest reading since July 2016.

Retailers did anticipate a better September, with a 19 balance expected for next month.

The volume of sales for the time of year balance fell to minus 10 from 6 in July, while orders placed with suppliers fell to minus 24 from 10.

Average selling prices continued to rise strongly, with a net 54 percent of retailers reporting increases, and prices are expected to rise at a similar pace in the year to September.

Employment declined further in the retail sector in the year to August (minus 35 percent, compared to minus 23 in May) and at the fastest pace since August 2009, with a broadly similar reduction in the head account expected over the next quarter (minus 33 percent).

Retailers expect the business situation to deteriorate further over the next three months (minus 8 percent), but investment intentions over the next year compared to the last month have improved since July (6 percent versus minus 9 percent).

While the August survey appears to confirm other signs (such as, though historic, this morning's GDP report) that U.K. consumers are being squeezed by real income declines as inflation outdistances wage growth, conclusions based on the very volatile monthly survey may not be valid for very long, or as valid. A more reliable guide may be the underlying 3-month sales volume balance, which also declined but more modestly, falling to 8 in August from July's 12, and remained in positive territory. But whether monthly or longer-term, as far as the BoE MPC goes, this inflation-caused weakening of retail sales has something for the doves as well as the hawks, so it may just be a wash.

The Confederation of British Industry (CBI) produces a monthly survey (and a more detailed quarterly report) analysing the performance of the UK retail, wholesale and motor trade sector. Volume sales, orders on suppliers, sales for the time of year and stocks are all covered and the quarterly survey also covers imports, selling prices, numbers employed, investment and business situation. Financial markets tend to concentrate on the CBI's annual sales growth measure as a leading indicator of the official retail sales report.

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