The pound US dollar exchange rate lost some of its gains following the release of poor UK retail sales data on Friday morning. The UK retail sales data disappointed expectations as it came in at -0.3% MoM in February, while core retail sales for the UK fell by 0.7% MoM the same month.

The disappointing retail sales data was much lower than the expected 0.6% and the previous reading of 1.9%. The core retail sales, which came at -0.7% MoM was also much lower than the expected 0.5% and the previous reading of 1.7%. When compared to a year earlier, the UK retail sales rose by 7% in February versus the expected 7.8% and last year’s reading of 9.4%, while the core retail sales increased by 4.6% in February versus 5.6% expectations and 7.5% the year before.

Retails sales: main points

According to the Office for National Statistics (ONS), “Food store sales volumes fell by 0.2% in February 2022 with large falls in alcohol and tobacco stores, which may be linked to higher spending in pubs and restaurants as confidence increased in going out; food store sales volumes were 0.1% below pre-coronavirus February 2020 levels.”

In terms of non-food stores sales volumes, there was an increase by 0.6% in February 2022 with growth in clothing (13.2%) and department stores (1.3%), as people returned to their offices and restrictions were lifted.

Automotive fuel sales volumes rose by 3.6% in February 2022 following the end of Plan B restrictions in England at the end of January where people started to travel again, with sales volumes reaching higher pre-coronavirus levels (0.9%) for the first time.

UK consumer confidence falls

GfK’s Consumer Confidence index, which every month provides a snapshot of how UK consumers feel about the economy and their outlook for the next 12 months, has fallen by five points to -31 in March, which are very low levels last seen in October and November 2020.

The forecast for personal finances in the next 12 months fell to -18, which is 28 points lower than this time last year. Expectations for the general economic situation in the next year have also fallen to -49, which is 32 points lower than March 2021.

The Ukraine war, higher cost of living and the pandemic have pushed UK consumer confidence lower as people are more worried about their personal finances. With surging inflation at a 30-year high, and expected to reach 8% in April, people are pessimistic about their financial situation and the more general geopolitical climate due to the war in Ukraine.

Joe Staton, client strategy director at GfK, has warned that there is “more bad news to come.” He said: “A wall of worry is confronting consumers this month and there is an unmistakable sense of crisis in our numbers. Consumers across the UK are experiencing the impact of soaring living costs with 30-year-high levels of inflation, record-high fuel and food prices, a recent interest-rate hike and the prospect of more increases to come, and higher taxation too – all against a background of stagnant pay rises that cannot compensate for the financial duress. This is the fourth month in a row that UK consumer confidence has dropped.”

He also stated that “Confidence in our personal financial situation and in the wider economy are severely depressed while the daily news of unimaginable suffering from a horrifying war in Europe and rising COVID numbers at home is adding to the bleak mood. The outlook for consumer confidence is not good; it’s certain there’s more bad news to come.”

Chancellor Rishi Sunak’ spring statement on Wednesday has also added to the gloomy outlook as households facing the hardest squeeze in the cost of living will get little help, while the Resolution Foundation has warned that 1.3 million people will fall into absolute poverty in 2023.

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