Little sign of green shoots as sales and output figures stall

Published on Thursday 17 September 2009 21:44

HIGH street sales stalled in August, while manufacturers reported depressed order books for the 15th month in a row, suggesting that the economy may struggle to shake off the effects of recession.

Despite hopes of a modest rise, sales volumes across the UK were flat last month, according to official figures published yesterday. The biggest decline was seen by clothing retailers as demand for summer clothes driven by May and June's hot weather, ground to a halt.

August's unchanged reading pushes the annual rate of growth in retail sales volumes down to 2.1 per cent from 2.9 per cent in July.

The downbeat data, from the Office for National Statistics, follows weak snapshots of the high street from the British Retail Consortium and the CBI.

It also comes amid a flurry of sales updates and financial results from some of Britain's biggest high street names, which have painted a decidedly mixed picture of trading.

However, the Scottish Retail Consortium's monthly survey, released earlier this week, showed retailers north of the Border had outperformed their southern peers last month. IHS Global Insight economist Howard Archer said consumers still needed "significant encouragement to put their hands in their pockets and spend".

Jim Boyle, head of retail at the Scottish arm of accountancy giant Deloitte, added: "While the talk in the wider economy continues to be of green shoots, this may take a long time to filter through to consumer spending."

Meanwhile, the CBI's latest industrial trends survey showed factory order books remaining in a depressed state.

A 48 per cent balance of firms said order books were below normal last month, although the figure was a slight improvement on the 54 per cent balance reported in July.

The CBI also saw signs of stabilising demand, with a balance of just 2 per cent of firms expecting output to fall over the next three months – the strongest result since June last year.

Export levels were well below normal, however, despite the weakness of the pound. A balance of 46 per cent said they were lower than expected, little changed on the previous month.

Vicky Redwood of Capital Economics said the results hinted at an improvement in underlying demand, but cautioned: "Manufacturing is not out of the woods yet.

"The orders balance remains low historically, particularly export orders. And although demand overseas has improved, the big picture is that the global recovery will be sluggish."

Archer stuck with his prediction that the manufacturing sector would make a "positive contribution" to GDP in the third quarter and help the wider economy return to growth. According to official figures last week, manufacturing output rose 0.9 per cent in July – three times faster than analysts had expected and the biggest rise since January 2008.

Car manufacturing grew by 10.4 per cent, helped by the government's car scrappage scheme.

CBI Scotland's assistant director David Lonsdale said: "Economic conditions clearly remain tough, and it is crucial that policy makers do what they can keep a firm lid on the costs under their control that affect business."