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Sales rise, but outlook still 'uncertain' for retail sector

Published 24/05/2016

Department stores, specialist food and drink and grocers have all performed weakly, according to new figures
Department stores, specialist food and drink and grocers have all performed weakly, according to new figures

Retail sales recovered in May but the current "cloud of uncertainty" is leading to a mixed outlook, figures suggest.

The retail sales balance rose modestly to +7% in May from -13% the previous month, with 36% of retailers reporting that sales volumes were up on a year ago and 29% saying they were down, according to the CBI's latest Distributive Trades Survey.

The survey of 121 firms found sales are expected to drop slightly next month, and orders placed on suppliers fell sharply over the year at their fastest since March 2009.

Within retail, department stores, specialist food and drink and grocers were weak performers, but this was offset by growth in other sectors such as hardware and DIY, clothing and recreational goods.

Retailers expect a marginal improvement in the business situation in the next three months, but sentiment is improving at a weaker rate compared with the past year.

CBI director of economics, Rain Newton-Smith, said: "A bit like the start of the British summer, it's been a mixed bag for the retail sector this month.

"Whilst sales have risen a little, they are expected to fall again next month, and orders have dropped sharply. Even though low inflation is still boosting pay packets, retailers are continuing to operate in a tough environment, with strong price competition squeezing margins.

"With a cloud of uncertainty hanging overhead, particularly from challenging global conditions and the outcome of the EU referendum, it's not surprising to see investment intentions deteriorating and business sentiment levelling off."

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