The latest CBI distributive trades survey paints a stark picture of a retail sector entering the new year under strain. Retail sales volumes deteriorated sharply in December, extending a downturn that has persisted since mid-2023 and intensifying as Christmas trading failed to provide relief. Expectations for January are even more pessimistic, signalling that the weakness is becoming entrenched rather than cyclical.

The slowdown is broad-based. Online sales, which had briefly shown resilience, slipped back into contraction, while wholesale and total distribution sales recorded their steepest declines since mid-2020. This synchronised weakness across retail, wholesale, and motor trades suggests that demand pressures are systemic, driven by fragile consumer confidence and tight household finances.

Operational indicators reinforce this bleak outlook. Retailers are cutting orders aggressively, pointing to subdued activity further up the supply chain, while stock levels have risen sharply relative to expected sales, raising the risk of discounting and margin compression. Although inventories are expected to normalise, this reflects retrenchment rather than recovery. Without policy action to ease cost pressures and restore confidence, the downturn risks becoming deeper and more prolonged.

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.