Home Economy Consumers Show Increased Confidence as Retail Sales Decline Slows

Consumers Show Increased Confidence as Retail Sales Decline Slows

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Consumer confidence appears to be on the rise as the balance of retailers reporting falling sales has dropped to its lowest point in ten months, signaling a potential resurgence in spending among Britons.

According to the Confederation of British Industry (CBI), the decline in retail sales slowed in February, with a weighted balance of -7 per cent compared to January’s -50 per cent. Factors contributing to this trend include slower price increases, improved consumer confidence, and robust wage growth.

While the weighted balance index doesn’t directly measure the volume of retail sales, it reflects the balance of retailers reporting rising or falling transactions compared to the previous year. The decrease in the balance reporting increased prices further suggests a potential easing of price pressures in the retail sector throughout 2024.

Selling prices inflation in retail dropped to a net balance of 54 per cent in the year to February, the lowest level since mid-2021, reinforcing expectations of a further decline in headline consumer prices inflation from its current rate of 4 per cent.

Martin Sartorius, principal economist at the CBI, noted that while the slump in retail activity eased in February, retailers anticipate sales to continue falling next month, leading to ongoing plans for headcount reductions and investment cuts.

The employment index, reflecting expectations for job cuts, has fallen to a weighted balance of -19 per cent, indicating the sixth consecutive quarter of negative territory. Companies foresee continued job cuts in the coming month.

Meanwhile, separate figures from the Office for National Statistics revealed a notable 3.4 per cent increase in retail sales in January, the sharpest rise since April 2021. With expectations of sales picking up further this year due to reduced inflation and strong wage growth, coupled with potential interest rate cuts by the Bank of England, household finances are expected to receive additional support.

As consumer sentiment continues to improve and economic conditions evolve, retailers are cautiously optimistic about the trajectory of retail sales in the coming months.

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