UK retail sales creep higher in February, missing forecasts
By Abigail Townsend
Date: Tuesday 25 Feb 2020
(Sharecast News) - Retailers are planning to ramp up investment this year, a widely-watched survey revealed on Tuesday, despite the poor start to 2020 extending into February.
The latest quarterly CBI Distributive Trades Survey showed that retail volumes edged ahead marginally, to a balance of 1%, in the year to February. That compares to 0% in January and December, and was the highest since April 2019, but was below the consensus, for around 3%.
Sales for the time of the year dropped to -14%, from -7% in January, which the CBI called "poor". Orders placed with suppliers fell to a balance of -13%, with retailers expecting a faster decline in March, at -22%.
However, investment intentions saw the largest swing since the survey began in 1983, the CBI said, with a balance of 26%, the highest since November 2010.
Ben Jones, CBI principal economist, said: "The prospects for a recovery in investment in the retail sector are on the up. This is particularly the case among large retailers, driven by shifts online and the trend for re-purposing retail space.
"But the first months of 2020 haven't brought a tangible change in fortunes on the high street. Conditions remain tough, especially for smaller retailers, and that won't be changing anytime soon."
Howard Archer, chief economic advisor to the EY Item Club, said: "While showing marginal improvement, the February survey does not really do much to advance the case that the marked rise in consumer confidence since December's decisive election has lifted their willingness to spend."
Samuel Tombs, chief UK economist at Pantheon Economics, said the survey suggested household spending was growing moderately in the first quarter, after flatlining in the last three months of 2019.
He continued: "The more accurate sales-for-the-time-of-year balance dropped to -14%, falling slightly below its 12-month average, -9%. Nonetheless, it is consistent with year-over-year growth in retail sales volumes recovering to about 1.5% in February, from 1.2% in January. In addition, some of this weakness might have reflected temporary disruption caused by the extremely wet weather.
"This will have temporarily hit demand for new spring clothing ranges, as well as persuaded people to stay at home rather than go shopping. March should be a much stronger month for retail sales.
"All told, we still expect quarter-on-quarter growth in households' real spending to average a solid 0.4% in the first half of 2020, buoyed by low inflation, steady job growth, a tax cut in April in the form of an increase in the threshold for national insurance contributions, and a reviving housing market."
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