Supermarket price wars hit retail growth

Price wars are saving us money, but sales growth is stalling

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Ongoing pressure in the supermarket sector has seen retail sales growth ease back from five-month highs in May, according to new figures.

The latest survey from the CBI showed 44% of retailers saw sales rise in the year to June, with 15% reporting a fall, giving a balance of 29%, which was lower than expected.

It is also below May's robust balance of 51%.

The report attributed the slowdown to the grocery sector, where volumes were flat compared to a strong showing in May.

Supermarkets are in the middle of a fierce price war where major players such as Tesco and Sainsbury's are battling discounters Aldi and Lidl.

The survey said that growth was a little above average for the time of year, with the clothing sector and goods such as flowers, watches and jewellery performing well.

The measure of expected sales for the month ahead also eased after hitting a 27-year high in last month's survey with a balance of 58%.

In June a balance of 33% of retailers expected sales to grow slightly next month.

Barry Williams, chairman of the CBI Distributive Trades Survey and Asda's chief customer officer, said: "Summer is a time of optimism for retailers and this year is no different. Even though growth slowed slightly this month, retailers are not letting that subdue their hopes for the season."

"Low inflation - expected to stay below 1% throughout this year - has given customers more discretionary income. The power of the pound in their pocket is going further and shoppers are spending more on treats, like flowers and jewellery, as well as on activities with their families."

Howard Archer, chief European and UK economist at IHS Global Insight, added that despite the slowdown in sales growth, the report pointed to "healthy consumer activity".

He said: "It looks highly possible that robust consumer spending has helped the UK economy regain momentum in the second quarter after gross domestic product growth moderated to just 0.3% quarter-on-quarter in the first quarter."

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