UK retail volumes slump eases, but weak demand still weighs - CBI

(Sharecast News) - UK retail selling prices in May grew at their slowest pace in more than a year and are expected to remain poor on the back of weak consumer demand although volumes were better than the record downturn posted in February, according to a widely read survey published on Tuesday. Sales volumes fell short of seasonal norms in May, while annual sales volumes continued to fall but at a slightly slower pace, the Confederation of British Industry said in its latest quarterly distributive trades survey.

June sales are expected to remain "poor" for the time of year, with the sales decline in annual volumes set to ease slightly further, the CBI added.

"Weak demand continues to weigh on retailers' sentiment, which has remained negative since mid-2024, as firms anticipate that their business situation will deteriorate over the coming quarter," the CBI said.

Against this backdrop, retailers expect to pare back both investment and hiring plans, extending a period of weakness that dates back to 2022.

Retail selling prices grew in the year to May at the slowest rate since February 2025 (+28% from +41% in February; long-run average of +41%). Retailers anticipate price inflation to rise at a broadly steady pace next month (+27%).

Retail sales for the time of year were judged to be "poor" in May, to a comparable extent to last month (-35% from -32% in April). June's sales are set to fall shorter of seasonal norms, but to a lesser degree (-14%).

Retail annual sales volumes fell in May at a decelerated pace, following April's steep drop - a weighted balance of -46% from -68% in April. Retailers said they expect the rate of decline to moderate further next month to -36%.

Retailers expect to reduce capital expenditure over the next 12 months (compared to the previous 12) to the greatest extent since February 2025 (-52% from -46% in February and a long-run average of -4%).

"The marked slowdown in retail price growth reported in May underscores the weakness in demand that retailers continue to face. With sentiment among retailers negative for two years now, businesses expect to cut back further on investment, while continuing to reduce headcount," said CBI economic surveys & data manager Charlotte Dendy.

"The Chancellor's decision to temporarily cut VAT on family activities over the summer should help support consumer confidence during a challenging period for demand. But lasting progress on the cost of living depends on making it easier and cheaper for firms to operate."

Reporting by Frank Prenesti for Sharecast.com