Press release

26 May 2020

CBI survey shows weak retail sales in May but just off April lows – EY ITEM Club comments

The May CBI distributive trades survey – carried out 28 April-14 May – showed a continued drop in retail sales as the sector continued to be constrained by lockdown restrictions.

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  • The May CBI distributive trades survey showed a fall in retail sales, although the rate of decline did slow slightly from April’ s drop
  • The sales balance rose to -50% in May from an equal record low of -55% in April
  • The May CBI survey follows on from retail sales volumes falling a record 18.1% month-on-month and 22.6% year-on-year in April as they were affected by the full impact of the COVID-19 lockdown restrictions
  • Matters set to improve for retailers given the planned progressive opening up of the sector during June But, while there may well be some degree of pent-up demand, it may be questionable that there will be an immediate pick-up in consumer spending
  • The planned progressive opening up of the UK retail sector during June looks consistent with the EY ITEM Club’s view that GDP may contract around 15% quarter-on-quarter in the second quarter. The EY ITEM Club suspects that consumer spending will contract by around 15% quarter-on-quarter in the second quarter
  • Assuming that the gradual easing of lockdown restrictions continue, the EY ITEM Club expects the economy to return to growth in the third quarter. However, this is unlikely to be sufficient to stop an overall GDP contraction of around 8% over the course of 2020

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

The May CBI distributive trades survey – carried out 28 April-14 May – showed a continued drop in retail sales as the sector continued to be constrained by lockdown restrictions.

The balance of retailers reporting year-on-year growth in sales volumes rose to -50% in May after falling to -55% in April  from -3% in March. March’s modest fall reflected the fact that the survey was carried out before many of the restrictions on the economy and society had been imposed.

The CBI reported that the modest improvement in the sales balance in May was primarily due to a return to growth in the grocery sector. There were significantly stronger online sales, and retailers are modestly less pessimistic about sales prospects for June.

Retail sales experienced record fall in April as full impact of Lockdown felt

Howard Archer adds: “Retail sales volumes fell a record 18.1% month-on-month and 22.6% year-on-year in April as they felt the full impact of the lockdown restrictions. This notably included the closure of non-essential retailers. Unsurprisingly, a BRC/ShopperTrak survey showed shopper footfall down 84.7% year-on-year in April."

This followed a drop of 5.2% month-on-month in March when sales had only been affected by just over a week from the lockdown. This meant that retail sales volumes had contracted 1.6% quarter-on-quarter over the first quarter.

Retail sales volumes were down 8.6% in the three months to April compared to the three months to January.

Retail sales excluding fuel fell 15.3% month-on-month and 18.4% year-on-year in April. This reflected fuel sales falling 52% month-on-month as the lockdown led to a sharp decline in private transport journeys.

Food sales fell back 4.1% month-on-month in April after they had grown 10.1% in March due to consumer stockpiling.

All other retail sectors saw weakness in April except non-store retailing where sales rose 18% month-on-month. This included falls in clothing and textile sales (down 50.2% month-on-month) and household goods (down 45.4% month-on-month).

Online sales as a share of total retail sales jumped to a record 30.7% in March as many consumers switched to online purchases. This was up from 19.1% in April 2019.

The annual retail sales deflator fell 0.6% year-on-year in April, primarily due to fuel prices being down 11.6% year-on-year. This followed a flat reading in March, which had been the lowest level since July 2016 and down from year-on-year increases of 0.5% in February and a 13-month high of 1.1% in January.

Excluding fuel prices, the annual retail sales deflator rose to 0.6% in April from 0.3% in March and 0.2% in February.

Outlook

Howard Archer concludes: “Matters are set to improve for retailers given the planned progressive opening up of the retail sector during June. Nevertheless, while there may well be some degree of pent-up demand, it may be questionable that there will be an immediate pick-up in consumer spending."

Meanwhile, the near-term fundamentals for consumer spending appear to have taken a downturn as a result of coronavirus. Many people have already lost their jobs despite the supportive government measures – as was highlighted by a 856,500 rise in claimant count unemployment in April – while others may be worried that they may still end up losing their job once the furlough scheme ends. Additionally, many incomes have been affected. The only recent good news for consumers has been inflation slowing to just 0.8% in April, the lowest level since August 2016.

Furthermore, consumers may be likely to adopt a very cautious approach to discretionary purchases given the current uncertain economic environment. Consumer confidence currently remains at record-low or near-record-low levels, with most measures indicating that consumers are unlikely to make major purchases at this point in time.

The EY ITEM Club suspects that consumer spending will contract by around 15% quarter-on-quarter in the second quarter, thereby being the major factor in expected GDP contraction of around 15% quarter-on-quarter.