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UK retailers reported a better February for sales after a slump in January, but have a negative short-term outlook for the first time in more than four years, the CBI has warned.
Two-fifths of the 64 retailers surveyed by the Confederation for British Industry said that sales volumes were up in February compared with a year ago, while just under a third said they had fallen. That gave a balance of +9, up from -8 in the previous month’s survey and ahead of expectations of a +4 balance.
But investment intentions for the year ahead fell for the first time since May 2016, the CBI said, while the business situation was expected to worsen over the next three months by a margin of -7, compared to +12 in January and marking the first fall in expectations since August 2012.
Just over a third of the retailers surveyed cited uncertainty over Brexit as the main reason they expected business conditions to worsen, while two-fifths fingered rising cost pressures as the main concern.
Ben Jones, CBI principal economist, said:
The rebound in retail sales suggests that some of the recent gloom about a slump in consumer demand at the start of 2017 may be overdone.
However, retailers remain cautious about their prospects, expecting fairly tepid growth in sales volumes next month against a backdrop of rising inflation that is likely to erode households’ purchasing power through the course of the year.
As the impact of the weaker pound feeds through supply chains, retailers are trying to absorb some of the increase in their import costs through savings.
Separate figures out last week from the Office for National Statistics showed that the UK’s retail sector performed less well than expected in January, with seasonally adjusted retail sales excluding vehicle fuel 0.2 per cent lower than in December and just 2.6 per cent higher on an annual basis, the worst growth rate in more than a year.