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Retails sales growing at fastest rate for two years in May, reveals CBI

Retail sales grew in May at their fastest rate for two years and are expected to be almost as strong this month the CBI&#39s latest quarterly distributive trades survey, reveals.

The survey suggests that consumers&#39 appetite for spending is undiminished.Some 65% of respondents said sales were up compared with a year ago while 14% said they were down.

The balance of plus 51% compares with plus 30% last month and indicates the highest sales growth since April 2002. A balance of plus 46% suggests retailers expect growthto be similarly strong in June.

The survey shows the underlying trend continuing to pick up. It is back up at the level of the last quarterly survey in February and at its strongest level since June 2002.

The strong sales growth boosted the volume of orders placed on suppliers, which grew at the fastest rate since April 2002. Stocks levels were left broadly unchanged.

Despite strong sales, and despite previously expecting a modest increase in employment, retailers cut jobs sharply. Twenty% said they were employing more people in May than a year ago but 37% say they reduced jobs.

The balance of minus 17%t is the sharpest fall since November 1992. Retailers expect the rate of job cutting to slow only slightly in June.

John Longworth, chairman of the CBI&#39s DTS Panel, says : “Strong consumer spending is fuelling the economy and this survey shows it is gathering momentum.

“Price promotions and warmer weather have contributed but rising take-home pay, low unemployment and a strong housing market are the key drivers of consumers&#39 willingness to spend.

“But competition is strong and retailers have only been able to increase prices slightly. With profit margins squeezed retailers have edged back investment plans and sharply cut jobs.”

Every retail sector reported sales higher this May than they were a year ago except confectionary, tobacco and news which saw sales unchanged. Many sectors saw very strong growth.

Footwear and leisure was the strongest with a balance of plus 88% indicating the strongest year-on-year growth in that sector since April 1990. Sellers of groceries and durable household goods, such as TVs, DVD players and fridges, were the others reporting the strongest growth.

Retailers say prices rose in the year to May at a similarly modest pace to that seen over the year to February. They expect prices to rise again in June but at a similar rate to the February survey.

Retailers are more optimistic that the general business situation will improve over the next three months than they have been for two years. Investment is expected to rise over the next three months but at a slower rate than reported in the previous survey.

As retail sales surged ahead wholesalers reported their strongest sales growth since February 1998 and the underlying trend is at its highest for six years. They are very optimistic about their business situation over the next three months but nevertheless expect only moderate growth in June.

Employment rose at its fastest rate since November 2000. Planned investment over the year ahead is the highest since the survey began in 1983.

Motor traders saw sales volumes grow sharply. It was the fourth monthly increase in a row and contrasts sharply with the falls recorded almost every month last year. Sales are expected to grow further in June but to a lesser extent.

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