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High Street confidence begins to stabilise despite further sales falls

High street sales fell for the fourth month running in the year to August, but retailers are no longer feeling pessimistic about the outlook for their business situation in the coming months.

GENERAL MERCHANDISE

High Street confidence begins to stabilise despite further sales falls

The business organisation also revealed that stocks have fallen further to a level that is considered to be just adequate, and that job cuts were heavier than in May's survey.

Answering the latest CBI Distributive Trades Survey, 34% of retailers said that their volume of sales in the year to August had risen, while 51% said they fell. The resulting rounded balance of -16% was similar to sales declines in the previous three months, and

was better than expected (-23%). A similar fall in sales is predicted for September (-14%).

Sales for the time of year were reported to be poor by a net 25% of retailers, while the three-month moving average of sales volumes, which smooths out monthly peaks and troughs, remained as weak as in July (-16%).

Retailers cut their orders placed with suppliers at a faster rate than in the last two months (a balance of -22%), with a similar decline expected in September (-24%). Stocks had been below their historic average since May, but fell back further in August to a level (a zero balance) where they are only just adequate to meet demand, for the first time since April 2007.

Quarterly questions revealed that employment conditions are tough within the retail sector, with a balance of 41% of firms reporting that they had reduced their headcount. This was noticeably more negative than in May (-29%) and a further decline in staff numbers is predicted in September (-36%).

The rate of increase in retail prices picked up from the three year low seen in May, with a balance of 23% reporting a rise in prices. This follows a year in which price inflation had slowed considerably, and retailers now expect to raise prices at a faster rate in September (+34%).

After an 18-month period of distinctly negative business sentiment, retailers are no longer feeling so pessimistic about the outlook for their general business situation. The balance of firms expecting a deterioration over the next three months is very modest (-2%) and the least negative since November 2007 (a balance of -1%).

Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Chief Operating Officer of Asda, said:

"These results round off a slow and disappointing summer for many in the high street, and the picture is not set to improve in September. Stock levels have been pared right back as retailers have adapted to weaker consumer demand. However, throughout the year retailers have become less and less negative about the business outlook, and that reflects increasing signs of stability in the wider economy."

Sales volumes in the wholesale sector fell steeply over the year to August, with a balance of 48% reporting a fall, which was much sharper than in July (-19%). An even steeper decline is expected in September (-55%). The volume of orders placed upon suppliers has fallen heavily but wholesalers expect the business situation to improve over the coming three months (a balance of +17%), and investment intentions are not as weak as they have been over the past year.

Motor traders' sales fell moderately in the year to August (a balance of -11%) and by less than expected (-50%). The sector expects sales volumes to grow tentatively in September (+6%) for the first time since May 2008 (+9%), while expectations about the business situation are positive (+6%) for the first time since February 2008. Average selling prices have risen strongly in August (+83%) at the fastest rate since 1990 (+95%), and this rate is expected to be maintained in September.

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