Retail Maintains Growth

Volumes of retail sales increased for the third consecutive month in the year to September and were above average for the time of year according to the CBI Distributive Trades Survey. Supplier orders also increased. Volumes are expected to increase again in October. There were also increases in wholesale but motor trade volumes were unchanged and have been declining now for three months.

Growth In SME Orders Expected To Fall

Smaller companies have seen production growth in the three months leading to the latest CBI SME survey due to stronger domestic and overseas demand and rebuilding stocks of goods. The total volume of new orders has grown over the quarter and exports were particularly strong. Weaker demand over the next quarter could cause it to stall as expected orders fall.

Sales Growth On The High Street Expected To Continue

Retailers have seen growth for the second month running according to the CBI Distributive Trades Survey for March. The trend is expected to continue through Easter. Sales volumes were reported to be higher than the same time last year as expected. The volume of orders also grew for the second month in a row. Stock levels are more than adequate to meet demand. Very strong sales were reported by grocers, durable household goods, clothing, furniture and carpet retailers. Hardware, china and DIY reported falling sales for the second month. The wholesale sector also saw a fall in sales against expectations. There was strong sales growth in the food and drink sector but agricultural machinery sales and builders merchants had a difficult month. Motor traders also had another bad month due to a drop in vehicle sales while parts and accessories sales grew for a second month.

Better Performance Than Expected On The High Street

Retail sales outperformed expectations for January according to the CBI distributive trades survey for February. The survey also revealed that although inflation has increased job losses have slowed down. Investment intentions have also improved.

The majority of respondents said their volumes were up in February with a marked improvement on January's survey results and beat their expectations. Orders improved in line with sales volumes. Retailers also expect further growth in sales and orders next month. Stock adequacy remains low.

The busines situation is expected to be fairly stable over the next three months. The job situation seems to be easing with the balance of businesses cutting back on staff expected to be the same in the next quarter. Annual capital expenditure in the next year is expected to remain about the same as in 2009.

Prices rose steeply in February but they probably reflect the changes in VAT coming in at the beginning of 2010. Clothing and grocers had a good month. Durables, furniture and carpets also did well. Among those that didn't do so well were hardware, china and DIY. Wholesalers did quite well but motor trades sale volumes fell and are expecting a further fall over the next quarter. The next quarter is expected to get worse, by a slight majority, and employment is expected to remain stable.

Manufacturing Returning To Growth

The CBI quarterly Industrial Trends survey results were released yesterday. They report that the decline in manufacturing output has slowed in the last three months and the prospects are brighter. Confidence is returning to the sector and growth is expected in the next quarter. The comparative weakness of the pound is also helping British companies to compete in export markets.

The volume of output from manufacturing fell again over the quarter according to a majority of companies responding to the survey though at a much slower rate of decline than in the last quarterly survey in July. A small majority of respondents also expect to see growth in the next quarter. Marginal growth is also expected in the domestic market even though demand has continued to slow. The contraction in demand for exports was less than expected and companies expect export orders to increase over the next three months. More businesses are optimistic about exports for the coming year than they have been since 1995. More and more businesses are also becoming more confident in the general business situation.

Destocking is continuing as stocks of finished goods fell at a record rate for a second time. Levels are more than adequate. Firms are planning to spend more on innovation over the next year. Expenditure on staff and training, plant and machinery is expected to remain unchanged.

Retail Beginning To Stabilise

The latest CBI distributive trades’ monthly survey, for September, suggests that retail conditions are beginning to stabilise. Sales are basically unchanged on the year to September and expected to remain so in October. A slight majority of retailer respondents to the survey reported sales volumes had risen over the year.

The results are better than expected following months of falling sales. Volumes of orders fell slightly but the three month moving average fall is slowing down. Retailers are keeping stocks low but are more than adequate to meet demand.

The sectors contributing to the overall figures include grocers, footwear and leather goods reporting good year-on-year results. All other sectors are falling, but the pace is slowing for clothing and furniture and carpets. Wholesale is ‘flat’ but are expected to fall next month. Food and drink, clothing, footwear and textiles reported the strongest growth. The hardest hit were industrial materials, builders’ merchants and electrical installation materials. Motor traders sale volumes were more or less unchanged in due partly to the scrappage scheme. They had been expected to grow in the year to September and are expected to fall next month.

Manufacturers Outlook Getting Brighter

The outlook for manufacturing is the least negative since June 2008 following months of destocking. Only a slight majority of UK manufacturers in the latest CBI Industrial Trends survey expect the volume of output to decrease in the next three months. However demand remains very weak with a majority of manufacturers reporting total order books still below normal for the seventh consecutive month. Export orders are also weak despite the weaker pound.

Exports To Lead Growth Next Month

Medium sized firms are reporting an increase in confidence for the first time since April 2007. They are expecting a growth in orders despite a marked fall in the volume of total new orders in July. Export orders also continue to decline but again firms are increasingly optimistic about exports. As with orders, so output is also slowing, but the optimism about exports includes leading a return to growth in the next quarter.

The quarterly CBI report on SMEs says that business remains difficult but although the indications are that business is still falling it will improve over the next three months. The position of the pound has not made much difference to small and medium sized businesses and their exports but they are responding to improved credit conditions. Firms are still running down stocks and working below capacity.

Difficult Summer For Shops

The CBI tell us that shops are still having a bad time in the High Street as retail falls again for the third month in a row. Their forecast for August is no better. The results are mitigated by saying that the fall is no greater than the rises we saw in May and June and a lot better than the falls between July 2008 and March 2009. That's better than expected by a lot of people.

Sales volumes are down but not as much as expected. Stocks are adequate to meet demand even though they are below average for the thrid succesive month. Orders fell again and the outlook for all of these figures is more of the same in August.

When looking at the individual sectors, grocers are seeing strong growth, as are footwear and leather with its best result since August 2007. Hardware, china & DIY, and furniture & carpets are reported falls while household durables fall is slower than last year. Wholesalers sales volumes fell in the year to July. In particular it was a difficult month for industrial materials and builders' merchants wholesalers. Food and drink wholesalers however reported another month of strong growth.

Export Orders Down

Manufacturers report that export order books are below normal for this time of year as demand for British made goods weakened last month. The latest CBI Industrial Trends Survey says it is the lowest since October 1998. It goes against the recent slight improvements seen since March this year. Total order books are still weak but show a modest improvement and the pace of decline in output is slower. Prices are expected to fall slightly over the next quarter but more slowly than previously expected.

Manufacturing Recession Improvement

The Chartered Institute of Purchasing and Supply (CIPS) has recently reported that the manufacturing sector is still in recession but the figures for the month of April show a marked improvement in terms of output and new orders. The Purchasing Managers Index (PMI) for April was 42.9 from 39.1 in March. Employment, inventories and output prices fell at record pace. The biggest cuts in employment were by the larger companies but overall a third reported job losses. The PMI is moving away from its February record low.

(The Chartered Institute of Purchasing and Supply PMI Survey indicates 50%=neutral and below 50% means a contraction)