Retailers have been enjoying their strongest sales growth in more than a year amid signs from Britain’s leading employers’ organisation of a pre-Christmas consumer spending spree.
The latest health check of high street and online activity from the CBI found that sales so far in December beat expectations, were above average for the time of year, and led to retailers beefing up their orders to suppliers.
But the CBI’s distributive trades survey also found that retailers expect the pace of growth to slacken in early 2017 when the fall in the value of the pound pushes up inflation and reduces living standards.
The survey of 112 retailers reported 51% as saying sales were higher than a year ago while 16% said they were lower. The resulting balance of +35 points was up on the +26 points recorded in November and the highest since September 2015.
After plunging in the immediate aftermath of the Brexit referendum in June, the CBI survey has rebounded strongly from October onwards. The employers’ organisation said sales growth had been broadly based, with clothes stores and supermarkets performing especially strongly.
Ben Jones, CBI principal economist, said: “It’s encouraging to see retailers reporting another month of healthy sales growth leading up to the festive season, which rounds off a fairly solid quarter.
“While we still expect to see decent growth in the near term, the pressures on retail activity are likely to increase during 2017, as the impact of sterling’s depreciation feeds through.
“With higher inflation beginning to weigh on households’ purchasing power, consumption patterns are likely to shift, creating winners and losers across the retail landscape.”
James Knightley, senior economist at ING, said the CBI suggested “consumer spending will again make a big contribution to 4Q GDP growth. It also again highlights the resilience of the UK economy despite the Brexit uncertainty.”
Howard Archer, chief UK economist at IHS Global Insight, said the survey covered a three-week period including Black Friday in November, a day when many retailers offered bargains to encourage early Christmas shopping, and the first two weeks of December.
Noting the caution expressed about the outlook for 2017, Archer added: “Retailers will certainly be hoping that consumers’ willingness to spend holds up over the final part of the vital Christmas shopping period and into the new year.”
