Retail sales subdued in February with highest recorded job losses.
Retail sales remained down on a year ago in February, dashing hopes of stability after last month’s post-Christmas fall, according to the CBI’s Quarterly Distributive Trades Survey, published today (Tuesday).
The survey also recorded the sharpest fall in employment in its 22-year history, a result of the poor retail climate through most of the past year. Survey responses show that 40 per cent of retailers said sales volumes were down on a year ago and only 22 per cent said they were up. The negative balance of minus 18 per cent compares with minus 11 in January. A further, more modest decline is expected in the year to March.
The underlying sales trend which takes a three-month average improved however, as November’s record low dropped out of the figures.
Sales were regarded as below average for the time of year, although to a lesser extent than in the previous month. The balance of minus 19 per cent was also significantly less negative than the average for the second half of 2005. Looking ahead, sales are expected to improve in relation to the seasonal average, although remaining below normal.
Grocery sales, which includes supermarkets, continued to increase although at a slower rate, and clothing stores reported that volumes had levelled off following two months of growth. But year-on-year sales fell in most retail sectors, with the largest falls recorded for hardware, china & DIY, furniture & carpets and footwear & leather.
Business optimism has improved since the last quarterly survey in November, when it was the weakest in the survey’s history. Retailers expect the business situation to be broadly stable over the next three months.
Employment in retailing has been on a declining trend for the past two years following several years of expansion, but in the year to February it fell at the sharpest rate in the survey’s history. Thirty-seven per cent of firms reported a fall in jobs while only 11 per cent reported a rise. The negative balance of minus 26 per cent compares with minus 15 per cent in November’s quarterly survey. Jobs are expected to remain similarly down on a year ago in March.
On a more positive note, prices stabilised in the year to February after falling in the previous five quarterly surveys. Retailers expect prices to remain stable into March.
Falling sales led to a reduction in the volume of orders on suppliers. The decline in orders is expected to continue over the year to March, although at a slower rate.
Stock levels fell in February in line with expectations. A further fall is expected in March although supplies will be adequate to meet expected demand.
Firms expect to make less capital expenditure over the next 12 months compared to the previous year. However investment intentions are less weak than in the previous quarterly survey.
John Longworth, Executive Director of Asda and Chairman of the CBI’s DTS Panel, said: “With rapidly rising household bills for energy, water and council tax, it’s no wonder that consumers remain cautious about spending money except on basics such as food.
“Competition in the high street remains tough as stores continue to tempt shoppers with discounts and other promotional offers. At the same time, retailers’ margins are being squeezed by sharp rises in the cost of energy utilities, rent and rates, environmental taxes and the minimum wage. But confidence about the overall retail outlook has recovered since November’s low and some retailers now expect a slight improvement in sales over the coming month.”
Wholesalers’ volumes fell at the fastest rate for over three years during the year to February, however sales are expected to increase slightly over the year to March. Employment declined at the fastest rate since May 1991 following two-and-a-half years of growth.
Motor traders reported the first annual increase in sales volumes since September 2004, with a further increase expected next month. Within this annual increase, sales of parts and accessories were up strongly, while sales of vehicles were still marginally down. However, vehicle sales have recovered considerably since the Autumn, when they were significantly down in year-on-year terms.
