Growth in high street sales volumes slowed sharply in February, with retailers expecting no further sales increase next month.
The CBI’s latest quarterly Distributive Trades survey also shows inflationary signs, as growth in sale prices soared to a 20-year high.
Growth in retail sales in February fell to a balance of six from 37, the CBI report shows. The balance is the percentage of respondents who said sales were higher than in the corresponding period last year, minus those reporting weaker sales.
These numbers are the weakest reading since June last year, and far below economists’ expectations of a modest slowdown to 28. Sales are expected to slow further in March, with retailers predicting a reading of zero.
“The positive effect of seasonal discounting on the high street that previously boosted sales has now waned,” says Lai Wah Co, CBI head of economic analysis. “Retail sales are likely to be more challenging over the coming months.”
At the same time, she adds, prices are set to rise considerably as the VAT increase and the soaring cost of raw materials are passed on to shoppers.
The CBI’s figures show that retailers put up prices in February at their fastest rate since 1991, and plan to keep up the pace of price rises in coming months as well.
“The VAT increase coupled with the rise in the cost of many raw materials means that retailers are working even harder to deliver value to our customers on groceries and everyday items,” saysJudith McKenna, chair of the CBI Distributive Trades Panel and CFO of Asda.
“With family budgets under increasing pressure, many shoppers are putting the purchase of big-ticket items on hold for the time being.”