Retail sales rose this month at the sharpest pace in nearly seven years as consumer spending powered the economic recovery, a closely watched survey suggests.
The CBI found that a net balance of 60 per cent of retailers reported higher sales in the year to August. This was up from 23 per cent in July and the highest reading since December 2014, according to its distributive trades survey.
Although demand is robust, businesses are struggling with operational challenges as labour shortages are affecting supply. Stock levels reached another record low as lack of materials continued to plague the economy.
The shortages are also creating inflationary pressure in the sector. The CBI said that selling prices in the three months to August rose at their fastest pace since November 2017 and that they are likely to continue rising over the coming months.
Of the 104 businesses surveyed by the CBI, a net balance of 73 per cent said that prices were up compared with the same month a year ago. This was up from 53 per cent in May.
The figures suggest that the retail industry is holding up more strongly than economists expected. Analysts had been pencilling in a fall to 20 per cent amid signs that demand for goods is declining as consumers start spending on services such as restaurants instead. Official data for July showed that retail sales fell considerably during the month as broader parts of the economy emerged from lockdown.
Alpesh Paleja, economist at the CBI, said: “A ramping up in retail sales growth in the year to August shows just how much consumer demand continues to spur economic recovery.
“While sales growth is set to remain strong, a more definitive shift in household spending towards consumer services is anticipated later in the year, leading to greater normalisation of growth in the retail sector.”