CBI survey shows high street sales recovering

The Confederation of British Industry's survey of retailers in July showed reported sales bouncing back from the low level of June. This suggests that the official figure for the volume of retail sales, due next week, will show a modest pick-up after remaining flat over the past two months. However, that would still leave the annual rate of growth at only 1 per cent.

"The underlying message is that retail sales are still growing," said Sudhir Junankar, associate director of the CBI. The survey also showed that retailers are expecting sales to increase in August.

However, Alastair Eperon, chairman of the CBI's Distributive Trades Survey Panel, warned: "Business for the time of year seems likely to be below average."

The breakdown of the survey showed that the depressed state of the housing market continued to affect the high street. The sharpest falls, compared with a year ago, were reported by furniture and carpet stores. The highest increases in sales volumes in July were reported by footwear, leather and clothing retailers.

For the first time since April, the reported rise in sales in July was in line with what retailers had been expecting a month earlier. However, this development seems to have been caused by aggressive attempts to shift stock.

According to Mr Junankar, the survey showed some signs of destocking. The volume of stocks in relation to expected sales fell to its lowest level this year, suggesting that retailers used the July sales to move unwanted goods.

The CBI survey used to be a reliable indicator of retail sales volume but, according to Simon Briscoe, economist at Nikko Europe, the relationship has recently broken down.

This view is echoed by Ian Shepherdson, economist at HSBC Markets. However, he believes that a reported sales balance of about 10 per cent would be consistent with a forecast of a 0.25 per cent monthly rise in the volume of sales in July. This would equate to an annual increase of just under 1 per cent, a far cry from the rates of 3 to 4 per cent seen in 1994.

The breakdown in the relationship between the official figures for retail sales volume and the CBI survey is thought to have several causes. One is the increasing polarisation of the high street between large retailers, which have done relatively well, and smaller retailers, which are suffering.