The retailing portion of the CBI distributive trades index weakened slightly in May as the Yr/Yr sales index fell to +18 from +21. At that mark the index stands in the 65th percentile of its high/low range. What is most disturbing in this report is the very high- highest ever- ratio of stocks to sales in May. That is a signal that the retail sector has become bloated with inventories relative to the pace of sales and this is happening with the pace of sales dwindling. That is a bad combination.

Excess inventories lead to reductions in retailer’s ordering from manufacturers and that sets industrial output lower and reverberates through the economy. The retail report this morning is part of an ongoing UK slow-down signal.

As for the outlook variables in this survey, sales compared to a year ago are expected to be stronger in June But sales for the ‘time of year’ are expected to remain weak at a -17 rating, a bottom 41% of the range response. The stock-to-sales ratio is expected to linger at an elevated ratio.

On balance the UK economy has been under pressure. Just today the Government’s net borrowing requirement rose on weakening revenues, showing clearly that hope to ride the ‘Laffer Curve’ with an austerity policy strategy will not bear fruit.

Meanwhile inflation in the UK is elevated and money growth is negative. There are all sorts of warning signals flashing in this economy. The retail sales report shows imbalances typical of the imbalances other sectors are seeing.