Consumer confidence in the U.K. fell in February as shoppers contend with increased prices and Brexit uncertainty, new figures show, sending supermarket stocks lower in mid-morning London trading.
GfK's Consumer Confidence index fell to -6 in February, down from -5 in the previous month amid signals that consumer spending is starting to weaken as prices rise.
"Against a backdrop of rising food and fuel prices, sterling depreciation, nominal earnings growth and a burgeoning fear of rapid inflation, concern about our personal financial situation for 2017 has contributed to a drop in UK consumer confidence this month," GfK's head of market dynamics Joe Staton said Tuesday.
U.K. inflation hit its highest rate in two-and-a-half years in February as the pound's steep post Brexit vote decline and a surge in global oil prices helped accelerate headline consumer prices 2 percentage points higher to 1.8%, according to official data from the Office for National Statistics. The Bank of England has forecast inflation will peak at just over 2.7% in mid-2018.
"Any momentum behind the post-Brexit, debt-fuelled, consumer-spending boom now appears to be softening," Staton added. "Mounting pressures on disposable income are starting to bite as witnessed by two months of falling retail sales (ONS) and a further drop in the Major Purchase Index (this month down by five points)."
Food retailers were lagging in London Tuesday morning as the FTSE 350 Food & Drug Retailers Index fell 0.52%, extending a three-month loss to nearly 1%.
Tesco (TSCDY) , the U.K.'s No. 1 supermarket, was down 0.58% at 118 pence. The stock has lost 10% over the past three months.
Aside from the gloomy confidence readings, Britain's supermarkets are also battling a fierce price war that is set to pressure margins as inflation accelerates.
No. 2 grocery chain Sainsburys (JSAIY) was little changed on Tuesday morning at 266.9 pence, it has gained 14% over the past three months. Morrisons (MRWSY) lost 0.41% to 242.8 pence, the U.K.'s No. 4 supermarket has seen shares gain 11.5% over the past three months.
Meanwhile, general retailers this morning got a boost from surges in Next (NXGPY) and Marks and Spencer (MAKSY) , taking the FTSE 350 General Retailers Index up 0.99% and helping trim its three month loss to around 3.8%.
The pair of clothing retailers got a boost from a Jefferies note published on Tuesday that said consumer perceptions show M&S "is consolidating its omni-channel improvements whilst Next continues to lose its historic advantage. Given this, and M&S' changes in strategy, we upgrade M&S from Underperform to Buy whilst maintaining Holds on Next," the analysts wrote.
Marks and Spencer was up 2.22% to change hands at 336.32 pence and Next had gained 2.26% at 3,896 pence.