Optimism is rising as retailers bounce back

Retailers are becoming more optimistic about their near-term trading outlook after a “challenging winter”.

For the first time since last September, a majority expect their sales to rise over the next month, according to the latest distributive trends survey from the CBI.

Of the 135 companies polled by the business organisation, a net balance of 9 per cent predict an increase in their sales during April. For the previous five months that reading had been negative.

Despite the gloominess hanging over the economy, shops generally have fared better in recent months than some analysts had feared. Retailers’ sales in March have held steady, with the poll’s headline sales volumes measure registering a positive level of 1 per cent, much better than the -6 per cent that economists had forecast.

Shops reported that their sales had been good for the time of year, with a net balance of 12 per cent saying trading had exceeded seasonal norms. Of those surveyed, a net 13 per cent expect that trend to continue in April. Economists noted that the average reading for this poll over the past 35 years had been -2 per cent.

Retailers have placed about the same number of orders with their suppliers in March as they did in the same month last year, a marked improvement from February, when orders were sharply lower. Wholesale volumes are also higher year-on-year this month and are expected to remain broadly unchanged in April.

“It’s encouraging that activity in the retail sector showed signs of stabilising after a challenging winter,” Martin Sartorius, the CBI’s principal economist, said. “This resilience has helped to inspire some spring shoots of optimism.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, the consultancy, said the survey data “suggests that a gradual recovery in retail sales is beginning to take hold”, but he added that a more significant recovery in sales was still some time away.

The CBI’s latest survey revealed that internet sales have fallen at a firm pace again in March, although they are expected to rebound slightly in April. Sales at car dealerships, which had been under pressure, have stabilised in recent weeks, although they are expected to decline again next month.

The retail industry, like other sectors, has been struggling to fill job vacancies. Sartorius said the chancellor’s decision to increase support for occupational health and to expand childcare provision would help shops to recruit staff. However, he told the government that “more needs to be done”. One of the CBI’s suggestions is that the government reforms the apprenticeship levy and turns it into a “more flexible skills challenge fund”.

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Optimism is rising as retailers bounce back