British retailers have reported their strongest seasonal sales in more than four years in June, according to the CBI, with online sales slowing as consumers rush back to the high street.
The easing of lockdown restrictions on shops and the hospitality industry across the UK, coupled with growing confidence in going out as the vaccination programme continues apace, fuelled the strongest sales since November 2016.
As shoppers returning to physical stores the rate of internet sales slowed to the weakest pace since last April.
“After a generally gloomy 2021 so far, the sun finally shone for retailers in June, with seasonal sales volumes the strongest since November 2016,” said Ben Jones, the principal economist at the CBI.
“This was the latest sign that the success of the vaccination programme is feeding through to stronger consumer confidence which, along with the reopening of hospitality, is encouraging shoppers back on to the streets.”
However, retailers are struggling to keep up with demand. Stock levels, compared with expected sales demand, hit the lowest level since the CBI began monitoring them in 1983.
The CBI’s monthly survey of 117 retail businesses found that companies operating in the retail, wholesale and motor trades all reported relative levels of stocks as “too low”.
A global shortage of raw materials and key components has hampered the economic recovery across much of the developed world and prompted fears that manufacturers will push up the price of goods and lead to higher shop prices.
The outgoing chief economist of the Bank of England, Andy Haldane, has warned that the “beast of inflation” is poised to return and Britain is at a “a most dangerous moment” for managing inflationary risks.
Consumer price inflation (CPI) rose in May above the central bank’s 2% target after increasing to 2.1%. The Resolution Foundation thinktank said recently it could go as high as 4% before falling back next year.
The Bank of England’s monetary policy committee said on Thursday that it would rise above 3%, but refused to put an exact figure on its prediction until it meets in August when policymakers are due to update their economic forecasts.
Inflation has mostly increased after a steep rise in oil prices that followed steep falls last year during the first lockdown.
Most economists believe that the oil price rise back to pre-pandemic levels will “wash through” the system and inflation will fall back next year.
Dhaval Joshi, an economist at BCA Research, said recent rises in the price of copper, silver and other industrial metals had begun to reverse, mainly in response to falling demand in China, the world’s largest centre of manufacturing.
The CBI survey, conducted between 26 May and 16 June, found that supermarkets, DIY shops, furniture, carpet and hardware stores continued to report strong sales as the home improvement boom continues this summer.
Department stores have also experienced an improvement in business, albeit only in that sales returned to historically average levels in June.
Clothing stores continue to report that sales remain poor for the time of the year, as changing travel restrictions mean many consumers are holding off on buying a new holiday wardrobe.
The CBI said sales are expected to remain solid next month but warned that despite the positive figures the recovery remains “patchy” with city shopping lagging behind retail parks.
“The sector remains a long way from a full recovery,” said Jones. “The return of demand is patchy, with inner-city footfall still well down. The outlook is clouded somewhat by supply pressures, with stocks seen as too low compared with expected sales, as logistical and capacity challenges continue to hamper global activity.”
