British consumer confidence has reached its highest level in four months, according to a survey released on Friday. Households reported feeling more optimistic about their personal finances, offering a glimmer of good news for Finance Minister Rachel Reeves amid signs of declining business sentiment following her October budget.
The GfK Consumer Confidence Index, a closely watched barometer of consumer sentiment, rose to -17 in December, an improvement from -18 in November and the highest reading since August. Economists surveyed by Reuters had anticipated no change, leaving the reading steady at -18.
Financial confidence improves
GfK reported that measures of both past and future financial confidence climbed to their highest levels in four months. However, other components of the index, including economic confidence and willingness to make major purchases, remained static.
Neil Bellamy, consumer insights director at NIQ GfK, noted that while personal financial sentiment had improved, broader economic confidence remained fragile.
“Consumers continue to express hesitance about big-ticket purchases, reflecting underlying caution about the overall state of the economy,” Bellamy said. “We will need to see robust improvements in economic perceptions before we can talk about sustained improvements in consumer morale.”
Mixed signals in consumer and business confidence
The rise in consumer confidence contrasts sharply with a decline in business sentiment. The downturn followed Reeves’ October 30 budget, which introduced significant tax increases for employers, creating concerns about future business investment.
A separate YouGov/Cebr survey released earlier in the week echoed the GfK findings, showing a modest uptick in consumer confidence despite a noted decrease in perceived job security.
Economic analysts suggest this divergence reflects consumers’ relatively resilient outlook on personal finances, even as businesses grapple with uncertainties stemming from the tax changes.
Economic growth prospects
Reeves’ budget, aimed at shoring up public finances, is expected to boost the UK’s economic growth rate temporarily next year. However, recent economic data, including disappointing retail sales figures, has cast doubt on the strength of the recovery.
More Read
Gross domestic product (GDP) data for October, due for release at 0700 GMT, will provide further insight into the economy’s trajectory. Economists are eager to assess whether the improved consumer confidence translates into tangible economic activity.
Survey details and implications
The GfK survey, which interviewed 2,015 people between November 28 and December 9, indicates that while consumers feel slightly more optimistic, significant challenges remain. Bellamy emphasised that major improvements in consumer sentiment are unlikely until there is a broader recovery in confidence about the UK economy.
Reeves is likely to welcome the improved consumer confidence as a sign that households are adjusting to recent fiscal changes. Still, analysts caution that sustained growth will require more than optimism, especially in light of ongoing business uncertainty and tepid retail performance.
In summary, while December’s GfK survey reflects a modest recovery in consumer morale, broader economic concerns persist. As Britain moves into 2024, policymakers and businesses will be watching closely for signs of sustained confidence and growth.
