Retail sales declined steadily in October

October saw retail sales fall at a similar rate to August and September with only a modest rise in volumes expected in November, according to new data from the Confederation of British Industry (CBI).

The latest CBI Monthly Distributive Trades Survey shows that 36 per cent of companies reported a fall in trading during the month compared to a quarter who witnessed a rise, meaning the rounded balance was down to 11 per cent from 15 per cent last month.

Volume of sales for the time of year was down 34 per cent, the lowest for over two years, with the steepest decline seen in the footwear and leather goods sector.

Ian McCafferty, CBI Chief Economic Adviser, said: “High street sales remain difficult but the decline has stabilised, and retailers expect there to be some very modest growth next month in the build-up to Christmas.

“Family budgets continue to be stretched because of a combination of high inflation, low wage growth and soaring unemployment, so consumer confidence is severely dented.

“High-street retailers are heavily discounting as they aim to provide the best possible value on basics, but consumers will continue on the back foot as real incomes remain squeezed.”

Whilst footwear & leather products fell in volume by 98 per cent, DIY goods dropped 75 per cent and clothing was down 39 per cent, however the grocery and furniture sectors performed more strongly with rises of 11 per cent and 34 per cent respectively.

Companies surveyed predicted sales volumes will rise by four per cent next month but Samuel Tombs, UK Economist at Capital Economics, warns that this positive outlook looks misplaced given the state of the general economy.

Tombs said: “The survey’s main reported sales balance rose from -15 to -11, beating consensus expectations for a fall.

“However, the balance recording sales for the time of year – which has had a better relationship with the official sales measure recently – fell from -30 to -34, its lowest level since May 2009. At that level, it points to retail sales volumes falling at an annual rate of around 0.5 per cent.

“With the squeeze on real pay set to remain intense for a while longer, unemployment falling and consumer confidence at very low levels, further falls in consumer spending seem very likely in the months ahead.”