Recession sting continues to grip UK retail sales

Battered by the worst recession since WWII, UK retail sales fell more than expected this month, and retailers do not expect it to be any better next month, says a survey conducted by the Confederation of British Industry (CBI).

This month's decline in sales was in line with retailer's expectations and, other than in April, was the least negative result in nearly a year.

At the same time, retailers' sentiments about general business prospects was the least negative for over a year.

The survey revealed that 31 per cent of retailers said year-on-year sales volumes were up in the first half of May, while 48 per cent said they were down.

Sales for the time of year were reported to be poor by 36 per cent of retailers, though they have slightly less negative expectations for June. The three-month moving average of sales volumes, which smooths out monthly peaks and troughs, remained weak but was the least negative figure for nearly a year.

A balance of 24 per cent reported a year-on-year fall in orders placed upon suppliers and, other than in April, this is the least negative since June 2008. The balance of +8 per cent of firms saying stocks were more than adequate to meet demand is the lowest since June 2007, which was +6 per cent.

Ian McCafferty CBI's chief economic adviser said, ''Businesses of all types are looking to reduce stock levels during the recession, to adjust to lower demand and to improve cashflow. Retailers' efforts appear to be having an impact, with stock levels lower relative to expected demand, which should help improve conditions along the supply chain.''

''Retailers are less pessimistic about their general business situation, and the decline in demand now appears to be slowing compared with the turn of the year. However, with unemployment still rising, conditions will remain tough,'' he added.

Among the retail sectors, two reported positive sales growth in May, grocers and footwear & leather, although sales grew for both at a slower pace than in April.

The hardware, china & DIY sector saw flat sales growth in May, while sales of big ticket household items, such as durable goods and furniture & carpets, continued to fall.

Sales volumes in the wholesale sector fell over the year to May, at a slightly faster rate than in April but in line with expectations. Average selling prices increased more slowly than they have since August 2007, but investment plans were being scaled back to a greater extent than at any time since February 1991.

Andy Clarke, chairman of the CBI Distributive Trades Panel, and chief operating officer of Asda, said, ''Conditions were tough again in May for retailers, proving April's better sales figure was a temporary blip. Trading conditions are expected to remain difficult in June.''

''The harsh reality is consumers need good reason to part with their hard-earned cash. Demonstrating you offer value for money as a retailer has never been more important, and marks out the true survivors,'' he added.