31 May 2007, 17:20 PM
  • A strong demand has encouraged retailers to push prices up in numbers not seen since 1998, according to a survey by the Confederation of British Industry (CBI).

The business group’s latest Distributive Trades Survey revealed 53% of retailers believed year-on-year sales volumes were up in May, against 21% who thought they weren’t. This positive balance of +31 marks the sixth month of consecutive growth, but it remained lower than April’s three-year high of +44 and the expectations for May (+36).

At +39, the average over the last three months is the strongest since July 2004. All in all, these results have motivated retailers to put their prices up compared to a year ago.

Sectors with the best growth were grocers; hardware, china and DIY; and footwear and leather. Sales of durable household goods were lower than a year ago. There are signs, however, that this increase in sales volumes and prices will abate in the coming months.

John Longworth, chairman of the CBI’s Distributive Trades Panel and executive director for ASDA, says, “Consumers continued to spend on the high street in May. However, we should not be too hasty in extrapolating recent data into medium-term inflationary pressures.

“Retailers’ expectations reveal that the impact of the recent interest rate rises might yet cause consumers to tighten their belts. Sales growth is expected to slow and pricing power to weaken. In addition, lower energy prices will eventually filter through. All this suggests inflationary pressure from the high street will fall back.”

The Distributive Trades Survey (DTS) covers 20,000 outlets of firms responsible for 40% of employment in retailing.