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UK consumers’ confidence about their personal finances has hit the highest level in more than two years, according to a closely watched survey.
Research company GfK said on Friday that people’s outlook on their own financial situation for the year ahead — a sub-index of its overall consumer confidence index — rose two points month on month to 2 in March.
The increase marked the first time since December 2021 that the measure has been above zero, and puts it well above its long-run average of minus 1.7.
However, GfK said the overall index — a measure of how people view their personal finances and broader economic prospects — was unchanged from February at minus 21 after a year of near-persistent increases, suggesting consumers remain cautious about inflation.
“The improved personal finance measure at +2 is encouraging,” said Joe Staton, client strategy director at GfK. “[Yet] it is clear the improvements in consumer confidence seen [in] most months since January 2023 have vanished.”
Despite the overall index remaining flat, confidence in the outlook for the general economy improved by 1 point from February to minus 23, after falling between January and February.
But survey respondents downgraded their view of the economy over the past 12 months by 2 points to minus 45, in a sign that persistent inflation is causing consumers to re-evaluate the UK’s recent economic progress.
Separate official figures on Wednesday showed that rents rose at a record pace of 9 per cent last month while headline inflation fell sharply to 3.4 per cent, the lowest since 2021.
Prime Minister Rishi Sunak pointed to easing price growth as evidence that his economic plan was working, and the decline has encouraged Number 10 to believe inflation could dip below the Bank of England’s 2 per cent target before a general election expected in the autumn.
A fall in inflation — and the boost to consumer confidence it could provide — are a key part of Sunak’s strategy as he attempts to narrow Labour’s 20-point opinion poll lead and convince voters the Conservatives are the best stewards of the economy.
Households remain uncertain of the overall direction of travel, although some retailers have announced larger than expected profits spurred by the outlook for UK consumer confidence.
Tomasz Wieladek, economist at investment company T Rowe Price, said it was “plausible that [economic] volatility . . . generated an environment of significant financial uncertainty and that this in turn continues to weigh negatively on overall consumer confidence”.
The BoE cited the “broadly stable” consumer confidence index on Thursday as it said interest rates would stay at a 16-year high of 5.25 per cent after “further encouraging signs that inflation is coming down”.
“Stability is a ultimately good sign,” added Staton.
Source: Economy - ft.com
