The survey of 121 firms, of which 60 were retailers, showed that the volume of sales grew modestly, in line with expectations, and similar to the growth seen at the start of the year. But sales are expected to drop slightly next month, and orders placed on suppliers fell sharply over the year, at their fastest since March 2009.
Within retail, department stores, specialist food & drink and grocers were weak performers. But this was offset by growth in other sectors, such as hardware & DIY, clothing and recreational goods.
Internet sales volumes grew significantly on the previous month, outstripping expectations, although growth is expected to see a small fall in June.
Retailers expect a marginal improvement in the business situation in the next three months, but sentiment is improving at a weaker rate compared with the past year. Investment intentions have deteriorated further, reaching the lowest level since August 2013, and retailers expect to cut headcount next month (following no growth in employment in this month’s survey).
Meanwhile, wholesaling saw continued growth in sales volumes, and motor trades reported better than expected growth.
Rain Newton-Smith, CBI Director 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."
Some 36 per cent of retailers said that sales volumes were up in May on a year ago, while 29 per cent said they were down, giving a balance of + seven per cent.
There are 21 per cent of respondents who expect sales volumes to increase next month, with 26 per cent expecting a decrease, giving a balance of minus five per cent - the lowest since May 2013.
Sales volumes grew in hardware & DIY (+69 per cent - the highest since April 2015), clothing (+60) and recreational goods (+59). They decreased in grocers (-25), specialist food & drink (-45) and department stores (-52).