Shore Capital has told investors not to hit the panic button on UK retail, despite a sharp slump in consumer confidence.
The broker called the October GfK reading a shocker, saying it erased all the gains since Andy Burnham became Prime Minister in the summer.
Confidence fell across every measure in the survey, including households' view of their own finances and the outlook for the economy.
Analysts Clive Black, David Hughes and Katie Cousins said sentiment looked worse than actual shopping behaviour.
Budget nerves
They suggested pre-Budget headlines were unsettling shoppers ahead of John Healey's first Budget.
With government spending exceeding tax receipts by more than £100bn a year, and debt at £3.05trn or 94% of GDP, they think Healey has little room for shocks.
A dull Budget could therefore bring relief to households.
Rates and fuel
Shore Capital expects the Bank of England to raise interest rates by 25 basis points in November, with inflation at 3.6% and Brent crude at $114 a barrel.
It sees scope for a further 25 to 50 basis points of increases by mid-2027.
Diesel prices have hit an all-time high, and the analysts noted talk of higher home heating costs in the New Year.
They said ministers' warnings to stock up on food and torch batteries would do little to calm nerves.
Reasons to be cheerful
The broker said the labour market looks more stable than feared in January, and inflation is broadly in line with wage growth.
Household savings remain healthy.
BRC and Barclaycard data show retail sales growing slowly since March, and Shore Capital gave little weight to the official ONS retail figures.
Its central view is continued mellow to subdued trading, not an implosion.
That may limit the scope for New Year earnings upgrades, but the analysts said most retailers are well run, with strong balance sheets and decent cash generation.
Two points to check before filing: the note's text gives the GfK score as minus eleven, but its chart shows the index at roughly minus 24 after a drop of about 11 points, so I wrote "slump" rather than a figure. It also gives September CPI as 3.6% in the text and 3.5% in a chart caption; I used 3.6%.
