Retail spending and consumer confidence rebound despite cost-of-living crisis

UK retail sales unexpectedly increased by 1.2 percent month-on-month in February, figures from the Office for National Statistics (ONS) showed.

While record double digit inflation continued to put pressure on consumer budgets, forcing households to cut back on luxuries such as takeaways and eating out, they spent more money at supermarkets and discount department stores.

Sales growth in January was also revised up from 0.5 percent to 0.9 percent.

In addition, a survey by research company GfK revealed that consumer confidence was at its highest level since March last year.

Even so, sales volumes were down 3.5 percent on the same period in 2022.

Ashley Webb from Capital Economics put the figures in context: “At face value, these data further add to the view that the recent resilience in activity is still holding up. But when households' finances are under pressure, it is possible that any improvement in retail sales will…be met by a softening in non-retail spending such as restaurants.”

GfK client strategy director Joe Stanton was likewise cautious in interpreting the data: “A small improvement in the overall index score this month masks continuing concerns among consumers about their personal financial situation…Wages are not keeping up with rising prices and the cost-of-living crisis remains a stark reality for most.”

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