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UK retail sales flat in Feb after Jan fall, outlook gloomy: CBI

Shoppers walk on Oxford Street in London

LONDON (Reuters) -British retail sales held steady in February after falling in January but stores expected sales volumes to slip again in March as the rising cost of living eats away at disposable incomes.

The Confederation of British Industry's (CBI) distributive trades index rose to +2 this month from -23 in January. A Reuters poll of economists had pointed to a reading of -13.

But a measure of expected sales in the month ahead fell to -18 from -15.

"Whilst retail sales volumes were largely unchanged in the year to February and slightly above seasonal norms, firms remain pessimistic about their business outlook and are bracing themselves for yet another fall in sales next month," Martin Sartorius, CBI principal economist, said.

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Official data published last week showed shoppers spent more than expected in January but inflation-hit households were buying fewer items and relying more on discounts.

Gabriella Dickens, an economist at Pantheon Macroeconomics, said the recovery in the CBI's sales measure this month would "likely prove a false dawn" as households are expected to spend less in the coming months as the risk of a recession looms.

The CBI said its survey showed retailers were gloomy about their prospects for the coming three months amid "acute" price pressures.

Its average selling price balance fell two percentage points to a still historically high +80 in the three months to February from +82 in the three months to the end of November.

The Bank of England has signalled that it believes the tide is turning on Britain's inflation.

Consumer price inflation eased to 10.1% last month after hitting a 41-year high of 11.1% in October. Economists polled by Reuters this month expected inflation to average 7.0% this year, and 2.6% in 2024.

The CBI's survey of 59 retail chains took place between Jan. 27 and Feb. 14.

(Reporting by Suban AbdullaEditing by William Schomberg)