- A substantially stronger April CBI distributive trades survey shows consumers significantly stepping up their spending, both in the run-up to non-essential retailers re-opening on 12 April and in the immediate aftermath. The survey only captures three days of the re-opening of non-essential retailers (the survey covers 25 March – 15 April).
- The pick-up in retail sales even before non-essential retailers re-opened indicates that increasingly confident consumers were already keen to release pent-up demand and spend. Many people seemed intent on having an enjoyable Easter break and this likely lifted retail sales later on in March.
- The CBI’s sales balance rose to +20% in April (the highest since September 2018) from -45% in March. The survey also indicates that retailers are relatively upbeat about sales prospects in May, with a balance of +10% expecting sales volumes to be up year-on-year. These results were buoyed by the fact that non-essential retailers were closed throughout the corresponding period in 2020.
- Consumers look well-placed to play a key role in a robust UK recovery developing from Q2 as restrictions on activity are eased. Consumer confidence picked up markedly in March and then edged up in further in April to be at a 13-month high, according to GfK. Additionally, early footfall evidence since 12 April has been encouraging.
- Consumer activity should benefit from recent very high savings ratios, especially as the labour market has been resilient and it now looks likely that unemployment will rise much less than had been expected. The EY ITEM Club has reduced its projected peak in the unemployment rate to 5.8%.
- In its newly released Spring forecast, the EY ITEM Club has lifted expected UK GDP growth in 2021 to 6.8% up from the 5.0% that was predicted in its January report.
Howard Archer, chief economic advisor to the EY ITEM Club, says:
“The April CBI distributive trades survey points to retail sales picking up significantly in late March and early April. This is despite the fact that the survey only captures a little of the period from when non-essential retailers re-opened on 12 April.
“The CBI’s sales balance grew to +20% in April – the highest level since September 2018 – from -45% in both March and February, and -50% in January – the lowest level since last May. The balance had previously fallen to January's low of -50% from -3% in December as non-essential retailers were shut anew as part of lockdown measures after briefly re-opening in December.
“The improved year-on-year April balance was lifted by the fact that non-essential retailers had been closed throughout the corresponding period a year earlier, as part of the first lockdown that was introduced on 23 March 2020.
“The CBI also reported that retail sales volumes were ‘viewed as good for the time of year for the first time in 2021 and to the greatest extent since June 2018.’ A balance of 16% of retailers considered sales volumes in April to be below average for the time of year. This compared to the 37% balance who had regarded sales as below par in March.
“The CBI also reported that ‘Hardware & DIY and furniture & carpets subsectors saw sales significantly above seasonal norms, supported by a consumer focus on home improvement. Grocers and non-store retailers also reported that sales were good for the time of the year. However, clothing and footwear store sales remained well below seasonal norms.’
“Online sales grew at a fast rate in April as they had done in March, with a positive balance of +57%.
“With non-essential retailers now open, retailers were relatively upbeat about sales prospects in May. A balance of +10% expect retail sales volumes to be up year-on-year in May. The positive sales balance for May also reflects the fact that sales were low in May 2020 due to the lockdown in place then.
“Nevertheless, the CBI warned that while the improvement in retail sales has been driven by sectors that have performed relatively well during the pandemic ‘little immediate rebound is expected for more embattled sectors such as clothing, footwear and department stores.’"