UK sees retail sales fall again

Retailers in the UK suffered a further drop in sales this month but were hopeful that shoppers would loosen their purse strings before Christmas.

Cash-strapped consumers continued to cut back over the past month, according to a survey by business body CBI, with volumes of footwear, clothing, hardware and DIY items the hardest hit.

But the overall rate of sales declines eased slightly compared to September, giving rise to hope that trends in the beleaguered sector might finally be improving.

Retailers expect next month’s sales to be marginally higher than a year ago - the first time sentiment has been positive since June.

CBI chief economic adviser Ian McCafferty said: “Family budgets continue to be stretched because of a combination of high inflation, low wage growth and soaring unemployment, so consumer confidence is severely dented.

“High-street retailers are heavily discounting as they aim to provide the best possible value on basics, but consumers will continue on the back foot as real incomes remain squeezed.

“High street sales remain difficult but the decline has stabilised, and retailers expect there to be some very modest growth next month in the build-up to Christmas.”

A balance of 11% of retailers said sales were down in October, compared to a 16-month low of 15% in September.

Sales of groceries, furniture and carpets put in an improved performance, helping the sector to beat economists’ expectations of a fall.

But the figure remained significantly below the second half of 2010 when an average balance of 42% reported sales increases and volumes were still lower than normal for the time of year.

Howard Archer, chief economist at IHS Global Insight, said the survey “still portrayed a reluctant consumer”.

He added: “It remains hard to be optimistic about the prospects for consumer spending given sharply squeezed purchasing power, mounting unemployment, depressed confidence and a moribund housing market.

“Retailers will be desperately hoping that consumers will decide to put their troubles to one side and loosen their purse strings to have a good Christmas.”

Some of the price pressures that have been hurting the sector are expected to ease next year as commodity prices drop, and the impact of this year’s VAT hike falls away, the CBI added.