Retail sales recover as inflation slows, CBI finds

Retail sales grew at their fastest pace since December 2022 in the year to May, as sales volumes jumped 8% to -44%, according to the latest CBI Distributive Trades Survey. Furthermore, the CBI said it comes as selling price inflation in the retail sector “eased considerably” in May, from 20% vs 54% in February, reaching its lowest point since August 2020 and having fallen back below its long-run average. Prices are expected to continue to increase at only a slightly faster pace next month (+30%). The CBI also revealed that retail employment continued to decline for the seventh consecutive quarter (-26%). Headcount in retail is expected to continue to contract next month, but at a more moderate pace (-18%). Retailers’ investment intentions for the year ahead have also deteriorated (-25%, from -9% in February), with retailers “broadly neutral” about their business situation over the coming quarter - at 2% from 6% in February. Looking ahead, it revealed retailers expect sales to fall slightly next month, but to remain broadly in line with seasonal norms. Alpesh Paleja, CBI lead economist, said: “May’s increase in retail sales adds to the swathe of data pointing to an improvement in activity over the near-term. Falling inflation, and continuing real wage growth will contribute to a healthier consumer outlook, in turn supporting the retail sector further. “That being said, retailers are restrained about their business situation over the coming quarter. Headline sales are expected to fall moderately next month, and it’s concerning that retailers’ investment intentions have deteriorated noticeably.” He added: “The mixed mood from our survey demonstrates just how nascent the economic recovery is. All parties should use this general election campaign to embrace policies which will embed sustainable growth, foster the investment we need to develop a labour market which delivers higher living standards, and to accelerate our transition to net zero.”