The British Retail Consortium (BRC) has observed an improvement in consumer confidence but warns confidence “could falter” as inflation remains high.

According to BRC-Opinium data, consumer expectations over the next three months of the state of economy improved to -32 in January, up from -38 in December.

Consumer expectations of the state of personal spending on retail over the next three months fell to -6 in January, down from +6 in December, and expectations of their financial situation improved to -8 in January from -10 in December.

Helen Dickinson, chief executive of the British Retail Consortium, said: “The new year brought hints of optimism, with the second consecutive improvement in consumer confidence in the economy and in people’s own finances. This was the highest in five months, though similar to a year earlier.

“The contrasting sharp fall in spending expectations, both retail and overall, was expected as the festive season came to a close. This was most keenly felt by Millennials and Gen X, the generations most likely to have children living at home.

“January’s renewed optimism is encouraging, but shows just how important it is for Government to build momentum and restore confidence to the levels seen in previous years.

“With wages still struggling to keep pace with higher costs of living, many people feel as though neither their own finances nor the wider economy is moving forward. And if business costs continue to accelerate through 2026 — from rising business rates to new regulatory burdens — then the risk is clear: inflation remains stubbornly high, and consumer confidence could falter once again.”