High street gloom as 2012 sales slump


The high street suffered a New Year hangover as retail sales put in their worst performance in nearly three years, a business lobby group said today.

The CBI said retail sales volumes fell in January, after modest growth in December, with a balance of 22% of traders reporting a decrease on a year ago, the lowest level since March 2009.

The majority of retailers said sales were disappointing for the time of year and orders were also down, with firms expecting levels to fall again next month, the CBI added.

Ian McCafferty, CBI chief economic adviser, said: "Shoppers have reined-in spending across the board at the start of the new year after taking advantage of early discounting last month, which boosted pre-Christmas sales."

Today's survey is likely to add to fears that the British economy is on course to fall back into recession, after official figures yesterday revealed gross domestic product (GDP) declined by a greater-than-expected 0.2% in the final quarter of last year.

The CBI said there was a mixed picture across retail sub-sectors, but with most reporting a fall in sales volumes on a year ago, including hardware and DIY, household goods and department stores.

Grocers saw a modest increase in sales, following a much stronger trading period last month. Supermarkets have been battling for customers with price-cutting campaigns and heavy promotions.

Mr McCafferty added: "Consumers are still holding off particularly from buying big-ticket items like washing machines and fridges."

The CBI survey was conducted between January 3 and January 17, with 135 firms taking part, of which 75 were retailers, 46 were wholesalers and 14 motor traders.

Retail sales returned to growth in the run-up to Christmas but businesses were forced to slash prices to bring in cash-strapped consumers, according to official figures.

The 0.6% rise in sales volumes in December, according to the Office for National Statistics, came as store-price inflation, the rate at which prices rise, fell to its lowest level for 16 months, from 3.6% to 2.4%.

Chris Williamson, chief economist at financial services information firm Markit, said: "Aggressive discounting helped push up sales in the lead-up to Christmas, but the New Year has started with something of a hangover on the high street.

"The survey is a reminder that the consumer is not likely to help boost economic growth in early 2012, as low wage growth, still high inflation, debt and job security worries discourage spending."