Press release

25 Mar 2020 London, GB

CBI survey points to markedly weaker retail sales in March outside food

While the March CBI distributive trades survey shows only a modest overall slowdown in retail sales, there is a sharp divergence between sales in the food sector and elsewhere.

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  • While the March CBI distributive trades survey shows only a modest overall slowdown in retail sales, there is a sharp divergence between sales in the food sector and elsewhere. It should also be noted that the survey covered the period 26 February to 13 March, so does not capture the increasing restrictions on retailers culminating in the majority of them being ordered to close at the start of this week. It also does not capture the increasing restrictions being placed on people’s movements. For example, Springboard reported that footfall on UK high streets was down 41% year-on-year in week ending 21 March.
  • Unsurprisingly, grocers and specialist food and drink shops bucked the generally weaker trend in March, seeing very strong growth reflecting the stock-piling by households that has been occurring. The CBI reported that most other sectors reported “sharp” falls in sales volumes.
  • Apart from the food sector, the retail picture looks very gloomy. Online sales will likely come increasingly to the fore, but they can only make up a limited amount of the lost business.
  • Unsurprisingly, retailers are pessimistic about sales prospects for April with the CBI survey showing a balance of -26% expect sales to be up year-on-year in the month. This was the weakest expectations balance since April 2009, and it would undoubtedly be lower now following the enforced shop closures.
  • Consumers are likely to adopt a much more cautious approach to discretionary purchases given the current highly fraught and uncertain economic environment.
  • Many consumers will still be very worried about their job security and income prospects despite the Government’s supportive measures. This is reflected in the IHS Markit household finance index plunging to 42.5 in March from a survey high of 47.6 in Feb with job security the weakest for eight years. The survey showed the appetite for major purchases plunged to the weakest since December 2012.  
  • Prior to the coronavirus impact, it had looked like the fundamentals for consumers would be pretty healthy over 2020. Employment rose strongly to reach a record high in the three months to January, while real earnings growth was a decent 1.5%. Additionally, there were a number of supportive measures coming into effect in April, including the ending of the four-year freeze on working-age benefits a 6.2% increase in the National Living Wage and a raising of the threshold for paying national insurance.

Howard Archer, chief economic advisor to the EY ITEM Club, comments:

“The March CBI distributive trades survey showed a limited overall downturn in retail activity. However, this marked a sharp divergence in performance between grocers and specialist food and drink shops, and other sectors.

“It should also be noted that the survey covered the period 26 February to 13 March, so does not capture the increasing restrictions on retailers culminating in the majority of them being ordered to close at the start of this week. It also does not capture the increasing restrictions being placed on people’s movements. For example, Springboard reported that footfall on UK high streets was down 41% year-on-year in week ending 21 March.

“The balance of retailers reporting year-on-year growth in sales volumes fell back to 3% in March after edging up to a 10-month high of +1% in February from 0% in both January and December.

“A balance of 5% of retailers said sales in March were below average for the time of year.

“The CBI reported that grocers (a balance of 94% reported increased sales) and specialist food and drink shops (balance of +42%) saw very strong growth in March reflecting the stock-piling by households that has been occurring.  

“In marked contrast, most other sectors reported “sharp” falls in sales volumes, including clothing, furniture and ‘other normal goods’ (such as flowers, jewellery, cards etc).

“The CBI reported that there was a varied performance across the retail sector in February. Variable performances by different sub-sectors, grocers and non-specialised stores enjoyed rising sales volumes but there were declines in other sectors, primarily clothing.

“This led the CBI to conclude that apart from food, households are putting off purchases of non-essential items. Non-store retailers reported a drop in sales volumes with growth in internet sales slowing to a below-average rate in March.

“Unsurprisingly, retailers are pessimistic about sales prospects for April with a balance of -26% expecting sales to be up year-on-year in the month. This was the weakest expectations balance since April 2009, and it would undoubtedly be lower now following the shop closures.”