(Bloomberg) -- UK consumer confidence slipped back in February, suggesting households are not ready to splash out despite growing signs that the economy has emerged from its shallow recession.

GfK said its key sentiment indicator dropped 2 percentage points to minus 21, ending a three-month run of improvements. Economists surveyed by Bloomberg had expected a reading of minus 18 on average.

Client Strategy Director Joe Staton described the findings as a “mixture of bad news and good news.” Most measures fell on the month — including a gauge of willingness to make major purchases — but households remained relatively upbeat about their finances in the year ahead.

“All the measures this February are better than a year ago, but consumer confidence alone will not carry us into a brighter economic future,” Staton said. 

The figures underscore the challenges facing Prime Minister Rishi Sunak, who is counting on a feel-good factor from falling inflation and improving living standards to rescue his Conservative Party before an election expected later this year. 

Data on retail sales and private-sector activity suggest the economy has turned a corner after sliding into a technical recession in the second half of last year. However, consumer spending is still being curtailed by high interest rates eating into household budgets. 

A GfK index tracking personal financial prospects, while stronger than other components of consumer confidence, remained at zero this month. 

“The reality for many households remains adapting spend to meet higher essential costs,” said Linda Ellett, KPMG’s UK Head of Consumer, Retail and Leisure. “Many households also still face higher mortgage rates when their fixed-term deal ends this year.” 

The figures provide a final snapshot of consumer confidence before the budget on March 6. With the Tories trailing 20 percentage points behind the Labour opposition in opinion polls, Chancellor Jeremy Hunt is widely expected to announce more tax cuts in a bid to win over voters.

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