Consumers in the UK have felt more confident about their finances in August amid slowing inflation, according to a key index.
The long-running GfK Consumer Confidence Barometer tracker show a five-point rise in consumer mood to -25 in August.It puts consumer sentiment back to a path of recovery after the figure dropped from -24 to -30 during the wettest July on record which saw a slump in retails sales.
Compared to August last year, the level has climbed up by 19 points.
The GfK Consumer Confidence Barometer is a monthly survey that asks a sample of British residents how they view their own finances and the wider economy in the past and next 12 months.
While the figure has been mostly in the negative territory, it fell to a record low of -49 in September last year, shortly before inflation hit a record high of 11.1 percent.
More detailed figures show people were more confident about their own finances than the overall economy.
The score for personal financial situations over the past 12 months rose by five points to -15. For the next 12 months, the score edged up to -3, almost in the positive territory.
Regarding the general economic situation, the confidence score for the past 12 months was up by 6 points but remained strongly negative (-52). For the next 12 months, the mood recovered by 3 points to -30.
Major purchase index was at -24, eight points up from that of July.
Joe Staton, GfK’s client strategy director, said the index regained momentum “against a backdrop of falling core inflation, higher interest rates, and rising average weekly earnings.”
Mr. Staton said while the headline consumer confidence figure remains “strongly negative at -25, hopes for our personal financial situation for the coming year are heading back towards positive territory, a metric that is key to indicating the future financial position of households.
“This renewed optimism can also be seen in the similar turnaround for our view on the general economic outlook for the next 12 months, and the eight-point advance in major purchase intentions is potentially better news for retailers as we move into autumn. However, while the financial pulse of the nation is still weak, these signs of optimism are welcome during this challenging time for consumers across the UK,” he added.
To bring inflation back to within 2 percent, the Bank of England BoE raised its overnight lending rate for the 14th time on Aug. 3, to 5.25 percent. Economists widely expects the BoE to hike the rate again in November.
Ruth Gregory, an economist at the consultancy Capital Economics, went future to suggest “the cost of living crisis is coming to an end,” although she cautioned the recovering confidence may by injured again if unemployment and interest rates climb up and house prices fall down, the report said.
In August 2023, more manufacturers thought that output would fall over the next three months than thought it would rise. The difference was -3% of manufacturers, down from +9% in July.
Meanwhile, Euro zone consumer confidence fell by 0.9 points in August to -17.
