Retail sales grew 'modestly' and remained in line with expectations, while sales are expected to ‘slightly drop’ next month.

According to theCBI’s latest quarterly Distributive Trades Survey, which featured 121 firms – consisting of 60 retailers, showed that retail sales rose slightly in the year to May, with 36% of retailers saying that sales volume was up, against 29% who said they were down, giving a balance of +7%.

However, 26% expect sales volumes to decrease next month, compared to the 21%  who predict an increase, giving a balance of -5% - the lowest since May 2013 (-6%).

Internet sales volumes grew significantly on the previous month, up by +49% compared with the previous month of +19%, outstripping expectations, although growth is expected to see a small fall in June.

Rain Newton-Smith,CBIdirector of economics, said: “A bit like the start of the British summer, it’s been a mixed bag for the retail sector this month. Whilst sales have risen a little, they are expected to fall again next month, and orders have dropped sharply.

“Even though low inflation is still boosting pay packets, retailers are continuing to operate in a tough environment, with strong price competition squeezing margins.

“With a cloud of uncertainty hanging overhead, particularly from challenging global conditions and the outcome of the EU referendum, it’s not surprising to see investment intentions deteriorating and business sentiment levelling off.”