Fresh produce continues to battle through as the recession broadens its bite across all sectors, with sales dropping and ‘weak’ prediction, according to the CBI.

In its latest Distributive Trades Survey, grocery sales volume was down by 12 per cent on 2008; however, with sectors such as clothing and household goods seeing sales fall by up to 85 per cent, produce continued to move above the market average slowdown.

Across the retail spectrum, predictions were matched, as 16 per cent of retailers said year-on-year sales volumes rose in the first half of January, while 63 per cent said they were down, although the decline was slightly slower than in December.

Over half of those surveyed expected sales to decline in February, the weakest forecast since the survey began in July 1983, although sales are still not expected to fall as sharply as in December (-55 per cent, which was a record low).

Sales for the time of year were reported to be poor by a net 47 per cent of retailers, and are set to remain well below average in February.

Wholesalers endured a very tough start to 2009, and an overwhelming balance of 91 per cent of firms said sales were down on the year to January, though this very sharp rate of decline is expected to ease next month (-37 per cent).

Andy Clarke, chairman of the CBI Distributive Trades Panel, and retail director of Asda, told freshinfo the supermarket was not feeling the prevailing trends too keenly “We have had a good Christmas, we’ve entered the year with a positive momentum and our position is very different to that of the overall sector," he said.

“The market is playing to our strengths in all aspects of our business. In food, we have seen an equal if not larger level of discounting and we continue to invest in value.

"As petrol costs and food inflation have come down and household energy bills are beginning to ease, consumers will have a bit more spending power, but as job losses increase retailers will face a difficult year.

“Scratch cooking is becoming a much stronger part of a customer’s basket and ready meal sales are going down. At this time you can almost put it down to a New Year’s resolution to spend less money,” he said.

Clarke also suggested the divide between premium and value ranges is becoming much clearer and retailers in the mid-market may suffer.

Ian McCafferty, CBI chief economic adviser, said: "Most of the retail sector continues to struggle as the recession bites more deeply, and February will be tough. It is possible that pre-Christmas discounting by some retailers numbed many shoppers to the allure of the New Year sales.

"Later this year we hope to see some benefit from recent interest rate cuts, falling inflation, and the government's steps to kick-start lending. But retailers will still have to work hard to coax anxious consumers back into the shops."

Suppliers to the retail sector were hit by another month of weak demand as 51 per cent of retailers reported a year-on-year fall in the volume of orders placed upon suppliers, with a similar decline expected in February at 53 per cent.

Topics