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Business Forum

News - 6 September 2008
(photo source:extranoise)

A summer best forgotten

A wet August and disappointing summer sales have compounded the deepening problems on the High Street. Sales have continued to fall sharply and jobs have been hit, according to a CBI survey published last week.

It was the second month of sharp falls in sales volumes and, with a similar drop expected in September, business confidence is very weak. Growth in average selling prices has eased back from a 16 year high, but remains strong.

Sixty per cent of respondents to the latest CBI Distributive Trades Survey said that sales in the first half of August were lower than a year ago, while 13% said they were up.

The resulting rounded balance of -46% was worse than anticipated (-32%) and the weakest since the survey began in 1983.

The weak demand has fed through to the volume of orders placed with suppliers, and a balance of 56% reporting a fall in orders was worse than expected (-32%) and marks a survey record low.

The rate of growth of average selling prices edged back over the year to August from the previous quarterly survey's 16 year high. However, the balance of 48% that reported price rises is well above the long-run average, and the expectation for September is similar (+42%).

Labour market conditions have weakened, with a net 31% of retailers reporting that their headcount is lower than a year ago. This trend in employment is expected to continue into September.

Confidence in the retail sector has also taken another hit. A balance of 38% of firms expects the retail business situation to worsen over the next three months and this has dampened investment intentions which have also dropped - a balance of -34% is much weaker than the historical average.

Looking at individual sectors, retail sales were weak across all businesses, except for grocers, who reported modest growth on a year ago. Sectors related to the housing market, particularly durable household goods and furniture & carpets, continued to face very difficult conditions, while footwear & leather retailers saw sales decline for the first time this year.

Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Retail Director of Asda, said, "This has been a summer that many retailers would rather forget.

The downturn in the housing market is continuing to depress sales for those shops selling big-ticket items.

"This month's report also highlights that as disposable incomes tighten, food retailers fare better than the rest of the market. Shoppers will continue to be forced to look around for the best value on offer for all their purchases - not just their groceries."

Ian McCafferty, CBI Chief Economic Adviser, said: "Retail conditions have been extremely tough this summer, and the wet August has been a further blow. Sadly, no let up is expected as we head into early autumn. The business outlook is particularly weak and retailers are having to scale back their employment and investment plans in an attempt to ride out the storm."

Retailers also need to brace themselves for higher costs on imports as the pound continues to fall against the Euro and now the Dollar.

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