But consumers "still in wait-and-see mode" amid inflation and tax concerns
UK consumer confidence has edged upwards following the Bank of England’s recent interest rate reduction, according to the latest GfK survey.
The index, which measures sentiment among British consumers, climbed to -17 in August from -19 in the previous month, marking its highest level since December last year.
The improvement was largely attributed to a more positive outlook on personal finances, with a three-point increase in households’ views on their own financial situation. The survey, conducted between Aug. 1 and 14 among 2,002 people aged 16 and over, also noted that the cost of borrowing has fallen to its lowest point in two years.
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Earlier this week, a separate survey by S&P Global also indicated an improvement in consumer sentiment, with confidence reaching its strongest point since the October budget, as the recent interest rate cut offered some relief to household finances.
“The improved sentiment on personal finances is welcome, but there are many clouds on the horizon in the form of inflation – the highest since January 2024 – and rising unemployment,” said Neil Bellamy, consumer insights director at GfK. “There’s no shortage of speculation, too, about what the autumn budget will bring in terms of tax rises.”
Despite the uptick in confidence, the overall index remains in negative territory, reflecting ongoing caution among consumers. Bellamy noted that confidence “continues to move in a very narrow band, and there’s no sense that it is about to break out into fresher, more optimistic territory.”
“The UK’s consumers are still in wait-and-see mode, and any surprises could result in sudden and sharp changes in sentiment,” he added.
Concerns about inflation and potential tax increases, particularly in light of recent data showing inflation at 3.8% in July and reports of possible tax changes in the upcoming autumn budget, were cited as factors that could weigh on sentiment in the coming months.
The survey also reported a four-point drop in the measure of savings, falling to +30 in August after reaching its highest level since 2007 in July.
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