Weather blamed for slow rate of rise in shop sales

The CBI distributive trades survey’s July sales balance fell to +11 from an 18-month high of +42 in June. Analysts had forecast a fall to +15.

Economists are likely to treat the confederation’s figures with a degree of caution, as last month’s strong balance was not reflected in official retail data, which showed barely any growth in June and suffered the biggest quarterly fall in sales volumes since the first quarter of 2010.

The CBI’s expected sales balance for August plunged to +3 from +32 for July.

“Retailers reported an annual rise in sales and orders for the third month in a row, but the increase was far slower than firms had anticipated,” said Judith McKenna, chief operating officer at Leeds-based Asda and chairwoman of the DTS panel.

“The unprecedented poor weather for the time of year did not help, but retailers also expect conditions to remain tough during August.

“With consumer confidence weak and wage growth remaining sluggish, the longer-term outlook for retailers remains challenging.”

The Confederation of British Industry said the weak rise in sales volumes was driven by lacklustre trade at department stores, as well as poor sales of cultural goods, while grocers and retailers of furniture, clothing and footwear fared better.

Retailers have been struggling as consumers clamp down on spending.

Howard Archer, economist at IHS Global Insight, said: “It is premature to write off retail sales in the third quarter.

“Even so, the consumer still faces serious headwinds and confidence is still low so it seems unrealistic to expect a sustained, major pick up in the near term at least.

“Purchasing power has been squeezed for an extended period, and consumer price inflation is running above earnings growth.

“Furthermore, oil prices have recently firmed anew which could lead to some renewed upward pressure on inflation. “

Mr Archer continued: “Meanwhile, unemployment is still relatively high, tighter fiscal policy is affecting many people and there in an ongoing need for consumers to deleverage.”