CBI report 'undiminished' consumer spending surge

A CBI report on retail sales has found that consumers' appetite for spending is "undiminished".

According to quarterly Distributive Trades Survey, published today, retail sales grew in May at their fastest rate for two years and are expected to be almost as strong this month.

Sixty-five per cent of respondents said sales were up compared with a year ago while 14% said they were down. The balance of plus 51% compares with plus 30% last month and indicates the highest sales growth since April 2002. A balance of plus 46% suggested retailers expect growth to be similarly strong in June, the organisation said.

The survey showed that the underlying trend continuing to pick up and is back up at the level of the last quarterly survey in February – its strongest level since June 2002.

Despite strong sales, and despite previously expecting a modest increase in employment, retailers cut jobs sharply, according to the report. Twenty per cent said they were employing more people in May than a year ago, but 37% said they had reduced jobs. The balance of minus 17% is the sharpest fall since November 1992. Retailers expect the rate of job cutting to slow only slightly in June.

John Longworth, Chairman of the CBI's DTS Panel, said that price promotions and warmer weather had contributed, but rising take-home pay, low unemployment and a strong housing market were the "key drivers of consumers' willingness to spend".

"But competition is strong and retailers have only been able to increase prices slightly. With profit margins squeezed retailers have edged back investment plans and sharply cut jobs," he added.

Every retail sector reported sales higher this May than they were a year ago except confectionary, tobacco and news – which saw sales unchanged.

Retailers are more optimistic that the general business situation will improve over the next three months than they have been for two years. Investment is expected to rise over the next three months but at a slower rate than reported in the previous survey, the CBI said.

The Distributive Trades survey covers 20,000 outlets of firms responsible for 40% of employment in retailing.

(gmcg)