Retailers bullish despite slowdown in February growth

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Retail sales dropped slightly below normal, but orders have remained above expectations during the past month, according to the CBI’s latest quarterly Distributive Trades Survey.

The survey of 124 firms consisting of 68 retailers showed that retail sales growth slowed slightly in the year to February, in line with expectations and was a little below average for the time of year.

Meanwhile, orders placed on suppliers were unchanged, better than expectations. However, expectations for March are the weakest since 2013, with sales expected to be flat on the year.

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Respondents expect a decent improvement in business conditions (which considers recent trends in sales, orders and profitability) over the next three months.

Average selling prices crept up for the first time in three quarters, easing pressure on retailing margins. And although recruitment growth slowed, it remained well above average rates with a similar rise expected next month.

But retailers now plan to slightly scale back investment spending in the year ahead, following two quarters when firms expected to raise capital spending.

Rain Newton-Smith, CBI director of economics said: “Overall, conditions remain challenging for retailers. Although sales have continued to grow and optimism has risen, expectations for sales growth are lacklustre and retailers are still wary of investing. And unreformed business rates are making it tougher for retailers to open up new shops on the high street. But retailers still stand to benefit from the low level of inflation and strong job creation across the economy, which should continue to support household spending.”

The volume of internet sales (+29%) remained far below its long-run average (+50% – since August 2009) during February.

While 38% of respondents reported that sales volumes were up on a year ago, 28% said they were down, giving a balance of +10%, matching expectations (+10%).

Retailers said they expect sales volumes growth to dip next month (+2%), the lowest for almost three years (-6% in May 2013), with 25% expecting them to rise and 23% to fall. However, retailers expect their overall business situation to continue to improve over the next three months (+12%), at roughly the same pace as the previous quarter (+11%).

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