High Street sales grow but pace continues to slacken

High street spending continued to grow in September, despite five interest rate rises in a year and the recent crisis of confidence in the financial markets, according to the latest CBI retail survey.

But the trend of slower growth in retail sales seen since May continued.

Thirty-seven per cent of retailers reported that sales had risen on a year ago against 25% that said they were down. The resulting balance of +12% falls short of pre-financial turmoil expectations (+17%) and was the lowest balance this year.

This sales growth nevertheless remains above the average rate recorded during the second half of 2006. Retailers also thought sales were around average for the time of year and expect the more moderate growth in sales to be sustained into October.

This snapshot is contained in yesterday's CBI Distributive Trades Survey, which was conducted between 30 August and 19 September and covers more than 20,000 outlets and 40% of retail jobs.

The three-month average, which reflects the underlying trend in sales volumes, slowed slightly to a balance of +15%.

Looking ahead, retailers are hoping for slightly better sales growth next month, with a balance of +16%. Sales are nevertheless not expected to be above average levels for the time of year, with 12% expecting volumes to be good but 21% forecasting they will be poor.

Wholesalers, meanwhile, said they enjoyed a bumper month in September, reporting the highest balances of sales volumes (+67%) and volumes of orders with suppliers (+64%) for 20 years. The fast pace of sales growth is reflected in below-average stock levels and also saw a 16-month high in volumes of industrial materials sales (+47%).

John Longworth, chairman of the CBI's Distributive Trades Panel and executive director at Asda said: "Retailers will be relieved to see that the recent troubles on the financial markets didn't have a serious impact on consumer spending in September. However, four consecutive months of more modest spending growth prove that higher interest rates are continuing to have an effect."

He added: "The Bank needs to keep a watchful eye on future confidence, which risks being dented further as a result of increased uncertainty about the economic outlook into 2008."