Market Update: We break down the business implications, market impact, and expert insights related to Market Update: Consumer confidence hit by ‘ripple of fear’ over Iran war – Full Analysis.
The ONS said supermarket sales fell back from January, while household goods retailers saw demand dampened due to February’s wet weather.
Non-store retailers – including online and catalogue businesses – also saw a dip in sales volumes, with retailers suggesting shoppers had brought forward spending to take advantage of January sales.
The drop in ONS retail sales was “modest” and below forecasts, but the fall in consumer sentiment is a “a sign of things to come”, Capital Economics UK economist Ashley Webb said.
Energy prices have increased dramatically since the outbreak of the US-Israeli war with Iran on 28 February, with benchmark Brent crude oil up around 50% to $110 a barrel.
Drivers are already seeing price rises at the pump, with figures from the RAC showing petrol up 13% on average, while diesel has climbed 25%.
There are also fears about household energy bills beyond the summer. While the energy price cap will fall in April, energy consultants Cornwall Insight have predicted average annual energy bills for a typical household could go up by around £300 from July.
On Thursday, the latest forecast from global policy group the Organisation of Economic Co-operation and Development predicted the UK would face the biggest hit to growth from the Iran war out of the G20 major economies.
GfK said its consumer confidence index fell two points to minus 21 this month, while expectations for the general economic situation over the next year dropped six points to minus 37.
“The decline in GfK consumer confidence in March… is probably the start of a bigger fall and suggests real household spending growth will soften in 2026,” Webb said.