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U.K. retail sales unexpectedly fell in February as an end to coronavirus restrictions saw Britons change their spending patterns as they socialized more and returned to the office.
The volume of goods sold in stores and online dropped 0.3%, after rising 1.9% in January, the Office for National Statistics said Friday. Economists had expected growth of 0.7%.
Spending dropped at food stores as more Brits headed to pubs and restaurants, while sales at household goods stores also fell. Clothing sales picked up as more peopled returned to the office, and the proportion of sales carried out online fell to the lowest since March 2020.
What Bloomberg Economics Says ...
“U.K. consumer spending slipped back in February as consumers had more opportunities to spend outside retail after England lifted all Covid-19 containment measures. Looking ahead, the biggest squeeze on incomes in a half-century is set to constrain consumer spending.”
--Niraj Shah, Bloomberg Economics. Click for the REACT.
Sales excluding fuel fell 0.7% in the month, the ONS said, and more declines in spending may be coming as consumers face a cost of living crisis.
That’s mainly driven by looming rises in energy bills that are likely to worsen due to the war in Ukraine, with the government’s fiscal watchdog warning this week Britons face the biggest squeeze on living standards in at least six decades.
A separate survey by GfK showed that consumer confidence plummeted for a fourth-straight month in March to its lowest level since November 2020, when the country was under heavy restrictions. Consumers’ outlook for their personal finances fell to the lowest since the financial crisis in 2008.
Bloomberg Economics sees spending slowing more in the coming months as the U.K. heads toward double-digit inflation and the Bank of England is poised to respond with further interest-rate rises.
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