British retail sales improved much more than expected in February and consumers' pessimism eased again, adding to signs of a tentative recovery in the economy even if the message was very mixed from sector to sector.
The more upbeat news from Britain's hard-pressed consumers supported the Bank of England's forecast of a return to more robust growth later this year. It may also help a government that is under pressure to announce steps to boost the economy in the budget statement next month.
The Confederation of British Industry said on Tuesday that its monthly survey's reported sales balance rose to -2 from -22 in January, beating by a wide margin economists' forecasts for -19. The expected sales balance also climbed to +2 for March from -10 for February.
A separate survey by the European Commission showed that British consumer morale rose in February to a six-month high.
Consumers have more life in them than previously thought and have been quite sprightly so far in 2012, IHS Global Insight economist Howard Archer said on the CBI poll.
The survey follows fourth-quarter GDP data which showed the first quarterly rise in consumer spending - which accounts for over 60 percent of all expenditure in Britain - in 1-1/2 years, offering the economy a base to bounce back from a dip in the last three months of 2011.
The central bank expects consumers to spend more in the second half of this year because falling inflation should ease the squeeze on their budgets.
However, many Britons seem to doubt that inflation will fall to the central bank's target of 2 percent over the next 12 months. A Citi/YouGov survey showed that inflation expectations for the year ahead climbed to 2.8 percent this month from 2.6 percent in January.
The breakdown of the CBI's retail data, however, gave a much more varied picture among different sections of retailers as shoppers focused on essentials.
Food retailers reported their strongest sales growth since last May, but sales of durable household goods continued to fall sharply and clothing sales declined at their fastest pace in almost three years. Department-store sales fell at their fastest pace since May 2010, and hardware and DIY sales dropped the most since August 2005.
With disposable incomes under constant pressure, retailers remain concerned about the general business outlook for the rest of 2012, said Judith McKenna who chairs the CBI's DTS panel.
According to quarterly CBI figures, retailers expect their business situation to deteriorate in the next three months, with readings for expected employment and investment intentions also weakening.
But in another sign that consumers are starting to find their feet, a separate CBI survey showed that the decline in business volumes for consumer-services firms had slowed substantially and should improve further.
Discount clothing chain Primark also said it expected a 15 percent annual rise in revenue for the six months to March.
One other indicator of consumers' confidence to spend is the value of their homes and there was encouragement from that area in Land Registry data that showed house prices in England and Wales rose 1.1 percent in January.
(Additional reporting by Fiona Shaikh; editing by Patrick Graham)