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CONSUMER CONFIDENCE FALLS IN FEBRUARY AS INFLATIONARY PRESSURES BITE Consumer confidence fell again in February as Britons’ concern for their personal finances deepened.

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fK’s Consumer Confidence Index fell by one point to -6, six points lower than at this time last year, against a backdrop of rising prices in the wake of Brexit. Pressures on disposable income have also started to bite, as evidenced by a further fall in the Major Purchase Index. The figure fell five points to +5 in February, seven points lower

than at this time last year. Joe Staton, Head of Market Dynamics at GfK, said: “Any momentum behind the postBrexit debt-fuelled consumer spending boom now appears to be softening.” Rising food and fuel prices, sterling depreciation, nominal earnings growth and a “burgeoning fear of rapid

inflation” have contributed to the fall in consumer confidence, he added. Despite signs that consumers are tightening their belts due to inflationary pressures, expectations for the general economic situation over the next 12 months increased three points to -20. But Staton cautioned: “Consumer spending continues to drive economic growth in the UK so any further fall in confidence could support forecasts for a slowdown of the overall economy this year.”

FIRST NON-FOOD QUARTERLY SALES DECLINE SINCE 2011 F

igures released by the BRC and KPMG show quarterly non-food retail sales in the UK declined 0.4% on a like-for-like basis to February 2017 and

“The impact of inflation on consumer spending will add further intensity to an already fiercely competitive environment in which the ability to adapt and innovate will be key to survival”

0.2% on a total basis, bringing about the first 3-month decline since November 2011 and taking the 12-month total average growth to 0.6%, the lowest since May 2012. In February, overall sales fell by 0.4% on a like-for-like basis on the same month last year. Growth was subdued by a continuation of the slowdown in non-food sales, which was marginally offset by slightly stronger growth in food sales. While there was a degree of negative distortion created by the later timing of Mother’s Day this year, the persistent weak sales performance of several

non-food categories points to an undeniable trend of cautious spending on non-essential items, according to the BRC. Chief Executive Helen Dickinson warned that tougher times are expected ahead. “The impact of inflation on consumer spending will add further intensity to an already fiercely competitive environment in which the ability to adapt and innovate will be key to survival,” she said. The 3-month trend to February showed online sales of non-food products again outpacing in-store sales. Online grew 7.7%, while in-store declined 2.4% on a total basis and 2.6% on a like-for-like basis.

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NON-FOOD INFLATION EASES IN FEBRUARY Overall shop prices fell by 1.0% in February, a significant deceleration of deflation compared to 1.7% in January, but nonfood prices, although less deflationary (a 1.8% price decline compared to 2.3% in January), are still falling considerably faster than the overall shop price index. Helen Dickinson OBE, chief executive of the British Retail Consortium, said: “For the time being, consumers continue to benefit from an annual fall in non-food prices, which were down 1.8% on the previous year. However, the rate of deflation has eased considerably from a monthly perspective, which can be explained in part by an end to the promotional activity in January after a weak festive sales performance in some non-food categories. “Looking further ahead, retailers, who operate in a highly competitive market with narrow margins, will be increasingly hard pushed to protect their customers from the inevitable impact of rising cost pressures. We can therefore expect this impact to start manifesting in shop prices over the course of the year.” Mike Watkins, head of retailer and business insight at Nielsen, said deflation in this sector of the market in part reflects the structural change underway in nonfood retailing.

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Get Connected Magazine - March 2017  
Get Connected Magazine - March 2017  

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