Overview
British retail activity showed signs of moderating deterioration in July, with the Confederation of British Industry (CBI) reporting the smallest year-on-year sales decline in six months. The CBI's headline distributive trades balance - which compares activity to the same month a year earlier - rose to -26 in July from -54 in June, marking the best reading since January.
Quick summary
- The headline distributive trades balance improved to -26 in July from -54 in June.
- Sales for the season were judged to be below normal by the smallest margin since February.
- Wholesalers reported broadly unchanged sales volumes in July for the first time in just over two years.
CBI commentary
CBI economist Martin Sartorius said: "Retailers reported that the ongoing sales downturn lost steam in July, but a recovery still looks some way off as gloomy sentiment and elevated cost pressures weigh on activity." The industry group highlighted the persistence of cost pressures even as the pace of decline slowed.
Policy asks and labour concerns
The CBI called for policy measures to support the high street as the sector navigates continued challenges. The industry group said it hoped new Prime Minister Andy Burnham's pledge to boost growth "in every postcode" would include lower property taxes for high-street retailers. The CBI also urged Burnham to address rising labour costs and to preserve employers' flexibility in hiring when the details of new employment legislation are finalized.
Wholesale and forward-looking indicators
On the wholesaling side, respondents reported broadly unchanged sales volumes in July - a first in just over two years. Retailers' expectations for August improved, with expected sales volumes rising to -26 from -45, representing the strongest outlook since March.
Data contrasts
The CBI's retail readings have been consistently more negative than comparable figures from the British Retail Consortium and the Office for National Statistics. The ONS's retail sales report last week showed 5.4% annual volume growth excluding fuel in the year to June, noting that a heat wave encouraged shoppers to buy summer clothing and fans online.
Survey scope
The CBI survey underpinning these findings was based on responses collected between June 26 and July 14, covering 67 retail chains and 105 wholesalers.
Key points
- Retail activity in July improved versus June, with the CBI balance rising to -26 - highest since January.
- Wholesalers reported broadly unchanged volumes for the first time in just over two years, suggesting some stabilization in supply-side distribution.
- Retailers' expectations for August strengthened to -26 from -45, the best outlook since March.
Risks and uncertainties
- Elevated cost pressures - including rising labour costs - remain a drag on retail activity, which could limit an upturn in sales and margins.
- Gloomy consumer sentiment may delay a recovery in retail spending despite improvements in month-to-month balances.
- The outcome of planned employment legislation and any resulting changes to employers' flexibility could affect hiring and operating costs for retailers and wholesalers.
Methodology note
The CBI survey sampled 67 retail chains and 105 wholesalers between June 26 and July 14. Comparisons with ONS and BRC data reflect differing survey approaches and timing.