Bruising time for the retail sector

THE floundering retail sector saw its worst performance in nearly 18 months, a key survey said today, as shoppers “focused on buying the basics at the best price”.

The CBI Distributive Trades Survey in September recorded its weakest year-on-year reading for retail sales volumes since May last year.

The decline in volumes was felt across all the main sub-sectors, including furniture and carpets, department stores, clothing and footwear.

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The survey is likely to fuel concerns for overall economic growth in the third quarter - July to September - following similarly downbeat manufacturing data from the Office for National Statistics and Markit Purchasing Managers’ Index (PMI).

Howard Archer, chief UK and European economist at IHS Global Insight, said the survey “fuels concern that already reluctant shoppers will hold back further on their spending”.

The CBI said 24% of retailers saw sales volumes rise year-on-year in September, while 39% reported a fall, with the resulting balance of minus 15% indicating a drop in activity.

Looking ahead to next month, retailers expect volumes to decline at a similar rate.

Judith McKenna, chairwoman of the CBI Distributive Trades Panel and chief operating officer at supermarket Asda, said high street sales were sluggish but stabilising.

She added: “However, consumer confidence continues to be bruised by a combination of low wage growth, high prices and rising unemployment.

“With the consumer spending squeeze set to get tighter with the winter utility bills rise, we expect retailers will face a challenging October.”

The weak survey will increase pressure on the Bank of England to increase its quantitative easing programme - pumping cash into the economy to give it a boost - as consumer spending plays a key role in the wider economy.