Retailers remained under pressure in March but the situation is expected to improve next month, according to the latest survey from the Confederation of British Industry.
The balance of retailers reporting year-on-year growth in sales was steady compared to February at -45. Analysts had expected it to improve to -37.
Looking ahead, however, the picture was brighter, with retailers expecting sales to grow in the year to April. The retail sales expectations balance for April rose to +17% from -62% in March. This is the first time expectations have been positive since December 2019, ahead of the re-opening of non-essential shops from 12 April.
But the CBI was keen to point out that the base for comparison is “relatively low”, given that April 2020 saw the joint sharpest fall in sales since the start of the survey in 1983.
Ben Jones, Principal Economist at the CBI, said: “Retailers are looking forward to April with a sense of optimism, given the potential re-opening of the sector across the UK. However, it is clear that the potential easing of domestic restrictions next month will not be a panacea for all retailers.
“Expectations point to a fairly muted recovery, especially when considering that base effects will tend to flatter annual growth next month, given the historic drop in sales in April 2020.”
He pointed to several possible reasons for this caution, including the possibility of spending shifting away from retail to other sectors due to re-open, such as outdoor hospitality, as well as continued social distancing in stores and expectations of a gradual return of footfall in town and city centres.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, noted that the CBI’s survey is always slow to register recoveries in spending after big declines.
“We doubt that the CBI’s survey is a good guide to retail sales at present. Retailers simply report whether sales are higher or lower than in the same month a year ago. This means that the CBI’s survey tends to understate recoveries in sales that occur after big declines.
“Note that the survey always is conducted in the first half of the month, so retailers compared sales in the current lockdown to those recorded before the UK went into its first lockdown on March 23, 2020. It also is skewed towards traditional high street retailers, who have been hit hard by store closures. Many other indicators show that retail sales are recovering, following January’s sharp 8.2% month-to-month decline.”