Retail booming, says CBI as Black Friday gets under way

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Retail has “picked up pace”, reports the CBI, which could hardly have picked a better day for the release of its quarterly Distributive Trades Survey.

With the Black Friday tills running hot, the business group’s poll of 126 firms, of which half were retailers, indicated that sales volumes for the time of year were “well above average”. They are expected to grow at a broadly similar pace next month.

The key findings were that 42 per cent of retailers said sales volumes were up, against just 16 per cent reporting falls. The CBI said the positive balance of 26 per cent was the strongest since September 2015, better than expectations and last month’s 21 per cent.

Some 39 per cent of respondents said they expected sales volumes to increase next month, while 16 per cent were forecasting a decline, another positive balance, this time of 23 per cent.

Nearly a third (31 per cent) of retailers said they had placed more orders with suppliers than they did a year ago while 24 per cent placed fewer. The CBI said the positive balance between those two numbers was the strongest since December 2015.

The survey went on to say 29 per cent of businesses reported that their volume of sales for the time of year were good, while 5 per cent said they were poor – a balance of plus 24 per cent.

Grocers were finding it tough, with sales volumes flat, but clothes retailers, DIY and hardware and non-store goods more than picked up the slack.

“It’s great to see retailers reporting such a buoyant month for sales,” said Rain Newton-Smith, the CBI’s chief economist. “With the later onset of cold weather, shoppers stocking up their winter wardrobe has helped to boost high street sales.”

She added: “While we expect to see decent growth in the near term, retailers are keeping a close eye on price rises coming down the track and the impact on consumer spending.”

And so they should, in the wake of the universally gloomy forecasts in Chancellor Philip Hammond’s Autumn Statement and the stark warning on the grim prospects for wage growth from the Institute for Fiscal Studies that followed it.

At this point it’s worth pointing out that you have to take the CBI's figures with a pinch of salt.

Although the survey is closely followed, the number of firms within it is quite small.

Retail analyst Nick Bubb observed in Retail Week last year: “As a guide to what is really happening on the High Street, focusing on ‘volume’ is surely pretty meaningless at a time of price deflation, as retailers focus on the ‘value’ of sales not the ‘volume’.”

He went on to say: “It is important to remember that the CBI survey is not a quantitative survey, notwithstanding some of the coverage it gets in the press every month. It simply measures the percentage balance between those CBI members who think that volume is up less those who think volume is down, and, as such, it is little more than a snapshot of mid-month retail sentiment.”

Mr Bubb conceded that the survey does nonetheless have a “surprisingly good record over time of tracking the ups and downs of official retail sales figures” from the Office for National Statistics. But it's hardly comprehensive or detailed.

In the midst of a Black Friday that will no doubt produce figures showing another record as retailers accept they’re damned if they do and damned if they don’t and decide to join the party, the figures do, however, combine with other data to show that the consumer is playing an important role in holding the economy up in the wake of a Brexit vote that has badly hit business investment.

How the survey, and other data tracking the performance of the the retail sector, responds into the New Year when price rises as a result of the weak pound start to filter through, combined with the realisation that wages aren't going to rise to meet them, remains to be seen.

Black Friday, and this latest survey, might just be the last hurrah before the reality of that sets in.