Essential reading for retailers and suppliers in the home improvement market

CBI survey shows growth in hardware and DIY sector

Published: 26 February 2018 - Kiran Grewal

Retail sales growth slowed for the third month in a row in the year to February, according to the latest CBI Quarterly Distributive Trades Survey.

Orders placed on suppliers were broadly flat over the year, but are expected to pick up slightly next month. Within the retail sector, growth in sales volumes was recorded in the grocers, hardware & DIY, and non-store goods (i.e. internet and mail order) sub-sectors. Meanwhile sales fell in clothing, footwear and leather, department stores, and furniture and carpets.

 

Growth in average selling prices remains above the long-term average in the year to February, but eased compared with the previous quarter. Similar price growth is expected in the year to March.

Alongside slower sales growth, employment in the retail sector continued to decline for the fifth quarter in a row, but at the slowest pace in a year. But for the first time since November 2016, retailers expect their business situation to improve over the next three months. And investment intentions for the year ahead strengthened further, hitting their highest since August 2015.

Looking at growth in the economy more broadly, momentum was modest for most of 2017. Much of this reflected the weakness in household income, which is a factor behind weaker retail sales growth over the past year. In the report it was said that similar subdued GDP growth was expected to persist further ahead.

CBI head of economic intelligence, Anna Leach, said: “While trading conditions remain tough, it’s encouraging to see retailers’ investment intentions improving to their highest since August 2015, in addition to signs of renewed business optimism for the first time in more than a year.

“With labour-intensive businesses such as retailers finding it increasingly difficult to find workers, agreeing a jobs-first transition between the EU and the UK, in writing, by the end of March would provide some much-needed certainty.”

Chief economic advisor to the UK economic forecasting group EY ITEM Club, Howard Archer, commented: “The February CBI distributive trades survey pointed to subdued retail sales at the end of January and the first two weeks of February. This  indicates that squeezed consumers remained cautious in their retail purchases after a weak start to 2018.  

“Specifically, the balance of retailers reporting year-on-year growth in sales volumes fell back further to a four-month low of +8% in February. This was down from +12% in January, +20% in December and +26% in November."

Key findings from the report

Retailers:

32% of respondents reported that sales volumes were up on a year ago in February, while 24% said they were down, giving a balance of +8%

Retailers expect sales volumes to pick up again next month (+21%), with 34% expecting them to rise and 13% to fall.

Sales were slightly above average for the time of year in February (+4%), with the balance a little above the long-run average (-1%).

The volume of orders placed upon suppliers was broadly flat in the year to February, with 31% of survey respondents reporting a rise and 28% reporting a fall, giving a rounded balance of +3%.  Firms anticipate that orders growth will pick up next month (+9%).

Retailers expect their overall business situation to improve slightly over the next three months (+4%), for the first time since November 2016.

Investment intentions for the next 12 months compared with the last 12 months in February (+16%) were at their highest since August 2015 (+17%).

Average selling prices growth slowed in the year to February (+52%) compared with the previous quarter, when it had risen to its highest since 1991. Price growth is expected to accelerate slightly next month (+60%).

Year-on-year growth in internet sales volumes (+45%) eased slightly from last month (+55%).

Grocers reported strong sales volumes growth in the year to February (+65%), while robust growth was also reported in other sub sectors, such as non-store goods (i.e. internet and mail order) (+67%) and hardware and DIY (+46%).

However, this was partly offset by falling sales in department stores (-45%), clothing (-77%), furniture & carpets (-36%) and footwear & leather (-57%).

Wholesalers:

53% of wholesalers reported sales volumes to be up on last year and 15% said they were down, giving a balance of +38%. 

 

Source: CBI

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