Growth in retail sales volumes picked up strongly in the year to May and expectations for next month are at their highest for 27 years, according to the CBI's latest quarterly Distributive Trades Survey.

Orders placed upon suppliers also rose more quickly than anticipated – at the fastest pace since December 2010 – while sales were well above average for the time of year – to the greatest extent since April 2007. The survey of 134 firms including 63 retailers showed that growth in both the volume of retail sales and orders exceeded expectations in May. Firms remain optimistic that both sales and orders are set to rise at an even stronger pace in the year to June.

Most retail sub-sectors reported robust growth in sales volumes including grocers and non-specialised stores, which rebounded from negative showings in the previous month to report strong performances.

Shopping (PD)After some weakness in the sector around the turn of the year, there are further signs of improvement. Employment stabilised in the year to May, with a slight pick-up expected next month, while pricing pressures eased with average selling prices rising only moderately. Firms are also more positive about their business situation for the coming quarter, although investment intentions for the year ahead remain in negative territory for the second quarter running.

Rain Newton-Smith, CBI Director of Economics said:

"Retailers will be encouraged to see growth in sales and orders on the high street bounding ahead.

"Low inflation, which we expect to remain below 1% for the rest of the year, has given household incomes a much-needed boost and greater spending power.

"Overall the outlook is bright for firms on the high street, but challenges still remain, especially for food retailers, who are still feeling the heat of stiff price competition from new entrants to the sector. And investment plans have also taken a hit."

Internet sales volumes rose firmly again in the year to May. However the rate of growth eased off slightly on the previous month, and fell back below its long-run average. Both wholesales and motor trades sales volumes grew strongly in the year to May and ahead of expectations.

Key findings:

• 60% of respondents said volumes were up on a year ago, and 9% said they were down, giving a balance of +51%, a strong pick-up in sales growth on the previous month (+12%) and above expectations (+40%)

• Retailers expect sales volumes to grow again next month (rounded balance of +58%), with 63% expecting them to rise and 4% to fall

• Most sub-sectors reported growth in sales volumes, with grocers (+50%), non-specialised stores (+98%) and recreational goods (+100% – a survey record high). But hardware & DIY saw a fall in sales volumes on a year ago (-67%) – the lowest since April 2013

• The volume of orders placed upon suppliers rose (+29%) at their highest rate since December 2010 (+52%), ahead of growth expectations (+22%). Firms anticipate a solid rise next month (+41%)

• Stocks relative to expected demand (+21%) rose slightly ahead of expectations. Stock adequacy is expected to ease back slightly in June (+17%)

• Volumes of sales for the time of year in May rose (+30%) at the fastest pace since April 2007 (=36%)

• Retailers expect their overall business situation to improve over the next three months (+20%)

• Intentions to invest over the next twelve months compared with the previous twelve remained negative (-10%)

• The growth in volume of internet sales slowed (+38%) and was below expectations (+59%), but with growth expected to pick up next month (+49)

• Average selling prices increased (+11%) following a fall in the previous quarter (-9%) with prices expected to be stable over the quarter ahead (-2%)

• Employment was broadly flat on a year ago (+3%), with a slight rise in headcount expected next month (+6%).

Wholesalers

51% of wholesalers reported sales volumes to be down on last year and 14% said they were down, giving a balance of +36%. Employment growth moderated (+5%) following a year of strong growth, with expectations for further modest growth in June (+8%).

Motor traders

71% of motor traders reported sales volumes to be up on last year and 12% said they were down, leaving a rounded balance of +59%. Investment intentions for the year ahead are positive (+27%).

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