High street ‘must not be complacent after sales rise’

By GARETH MACKIE
Published on 30/05/2012 03:41

High street sales grew at their fastest pace in more than a year this month, but analysts warned that retailers are likely to face pressure as consumers tighten their belts.

According to the latest CBI monthly distributive trades survey, 43 per cent of retailers reported an increase in sales volumes compared to a year ago, while 23 per cent said they had seen a fall. The resulting balance marks the strongest outcome since April 2011.

Judith McKenna, chief operating officer of supermarket giant Asda, who chairs the CBI survey panel, said: “It’s encouraging to see high street sales up compared to a year ago, and that business sentiment about the next three months has improved.

“However, sales are still below the average for the time of year and the combination of high unemployment, slow wage growth and weak consumer confidence mean that the retail sector is likely to remain under pressure in the short term.”

Chris Williamson, chief economist at Markit, warned that boosts to spending caused by the Diamond Jubilee and Olympics will provide only temporary relief. He added: “Given how tight personal finances are at the moment, any such increases in spend my well soon be followed by a commensurate fall as households keep their spending under tight control.”

Recent snapshots of UK retailing have painted a distinctly mixed picture and the sector has suffered a number of high-profile collapses as consumers continue to tighten their purse strings. The Office for National Statistics recently reported that sales volumes fell 2.3 per cent month-on-month in April.

Although consumer inflation fell to 3 per cent last month, IHS Global Insight economist Howard Archer warned: “This is still well above annual earnings growth so purchasing power continues to be squeezed.”