Poorest shop sales for two years lead to wholesale cuts

18 September 2002
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19 September 2002 | Robin Parker

Retail wholesalers are placing fewer orders with suppliers because shop sales are at their lowest for two years, according to the latest economic data.

More than half of wholesalers cut their orders in August, and 41 per cent expected the trend to continue this month, said the Confederation of British Industry's (CBI) distributive trends survey.

Nearly a third of retailers said sales were down last month, contributing to the slowest rate of growth since October 2000, and 28 per cent expected sales to drop further in September.

Retailers said they planned to reduce spending on capital goods such as buildings and machinery in the next year.

The report followed a similarly dire warning in a separate CBI survey, which found that service sector firms' confidence fell for the first time this year.

Professional services firms, such as consultancies, cut their charges by the highest amount since the survey began in 1998, thanks to increased competition and spiralling demand.

Despite the warnings, the Bank of England has kept interest rates steady at 4 per cent for the past 10 months.

Ian McCafferty, chief economist at the CBI, called for cuts if the predictions were borne out.

"Consumer spending is slowing sharply and confidence has been knocked by uncertainty in the financial markets and the wider economy," he said. "Retailers now believe an upturn will not come quickly."

While painting a slightly more positive picture, with activity continuing to expand, the CIPS/NTC Research purchasing managers' index (PMI) reported continuing cutbacks at service sector firms.

About 15 per cent said staff levels fell in August, with the strongest decline in the business services and financial sectors.

Meanwhile, the PMI for the manufacturing sector showed signs of growth in August, moving back out of contraction after July's decline. The rise was largely due to increased output, but the index warned that demand remained unpredictable.

• Economic growth is strongest in the south-west of England, according to a new monthly regional purchasing managers' index from NTC Research and the Royal Bank of Scotland.

SMsep2002

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