FRESH evidence emerged from the CBI yesterday that UK consumer confidence is rising as it revealed that retail sales are growing at their fastest rate since January.
City economists said the CBI distributive trades survey was the latest in a string of more positive economic data that added weight to Chancellor George Osborne’s recent claim that Britain was now on the mend after a five-year downturn.
Stephen Gifford, the CBI’s director of economics, said: “The feel-good factor from the heatwave and early summer sales has helped boost high street sales, after a very weak start to the year.
“A positive knock-on effect on retail sales from the royal baby has been mooted but, much more realistically, continued good weather and discounts will play a greater role in retail growth over the next month.”
Despite the better high street picture, the CBI said that overall sales volumes remained below average for the time of year, and growth was expected to ease back to plus 10 per cent in the traditionally “quiet” holiday month of August.
Howard Archer, the chief UK economist at economics consultancy IHS Global Insight, said: “A significantly improved CBI distributive trades survey for July suggests that consumer spending got off to a robust start to the third quarter after seemingly making an appreciable contribution to GDP growth of 0.6 per cent quarter-on-quarter in the second quarter.” Retail contributes 10 per cent of Britain’s GDP.
However, Archer added: “Even so, uncertainty persists as to whether consumers will be able or willing to keep spending at a decent rate in the near term, at least while their purchasing power is being squeezed by inflation running appreciably higher than earnings growth.”
This view was backed by the CBI. Gifford said: “A return to even modest spending is welcome news, but the bottom line is that confidence will not bounce back fully until family finances improve significantly.”
In the CBI’s survey of 60 retailers, 37 per cent reported sales volumes to be below average for the time of year and 18 per cent above – the resulting net balance of minus 19 per cent was worse than expectations of a more modest minus 6 per cent.
Grocery sales growth was modest (+6 per cent), marginally down on last month (+9 per cent). Other sub-sectors reporting year-on-year rises included department stores (+98 per cent), clothing (+73 per cent) and footwear & leather (+17 per cent). Falls included specialist food & drink (-43 per cent) and furniture & carpets (-73 per cent).
The CBI’s distributive trades survey is 30 years old this month.