U.K. Consumer Spending Rises as Cost of Essential Items Climbs

BNP's Saywell Sees Too Much Optimism in Pound

U.K. shoppers boosted spending in January as they paid more for essential purchases.

Consumer spending climbed 3.9 percent from a year earlier, Barclaycard said in a report on Tuesday, an increase driven by higher prices and supermarket purchases. In a separate survey, the British Retail Consortium also cited higher food prices as it reported a 0.6 percent increase in like-for-like retail sales last month.

Spending flagged in the latter half of 2017 as the pound’s drop since the Brexit vote pushed up the inflation rate. The reports Tuesday indicate some resilience as the initial hit from the vote subsides, tying in with surveys in January showing increased confidence among consumers and businesses.

Official data also indicated growth and employment ended the year on a firmer-than-expected footing. Coupled with above-target inflation, the somewhat brighter outlook has raised speculation that the Bank of England may raise interest rates again as soon as May after the first hike in a decade last year.

Still, the reports also suggest that consumer optimism isn’t pervasive. Barclaycard’s survey showed a drop in confidence in the economy, with almost half of respondents concerned that Brexit talks will leave them worse off. Both noted struggles in discretionary spending as Britons cut back on non-essential purchases.

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