UK consumer confidence hits highest level since April 2022

UK consumer confidence rebounded in February to the highest level in almost a year, in a sign of household resilience despite the cost of living crisis, data showed on Friday.

Research group GfK said its consumer confidence index, a closely watched gauge of how people view their personal finances and broader economic outlook, rose seven points to -38.

It beat consensus forecasts of -43, the highest reading since April 2022 for the index, which fell to a near-record low in January. The measure remained well below zero, however, indicating that most respondents reported a decline in confidence.

Joe Staton, director of client strategy at GfK, said that although February’s score was “still deeply depressed”, consumers were “suddenly more optimistic about the state of their personal finances and the general economic situation, especially for the next year”.

Survey respondents, based on interviews conducted between February 1 and 13, were more optimistic about the year ahead, as a sub-index measuring their general outlook on the future economic situation rose 11 points between January and February.

Line chart of the Consumer Confidence Index showing UK consumer confidence rose in February

Consumers also reported regaining confidence in their personal finances, as well as an increased willingness to make expensive purchases.

The savings index, which measures how likely consumers are to put money away but is not included in the overall score, rose from 14 to 19 – a level five points higher than in February last year.

The rise in all five measures included in the overall index suggests that consumers may be experiencing “a milder recession than experts predicted,” Staton said.

The survey follows a raft of encouraging official data, showing the UK avoided a contraction in the final quarter of 2022, while the labor market remained resilient despite economic headwinds.

Core inflation eased to 10.1% in January, from a 41-year high of 11.1% in October, the Office for National Statistics said last week.

Meanwhile, public finances recorded a surprise £30bn boost in the financial year to January, the ONS said on Tuesday, enabling Chancellor Jeremy Hunt to deliver extra support to households in his Spring Budget on 15 March.

Overall, consumer confidence in February was 12 points lower than in the same month in 2022, as rising energy bills and higher interest rates and food prices squeezed household budgets over the past 12 months.

“[Consumer] Sentiment as well as the economy remains a long way from pre-lockdown levels,” Staton said, “but some consumer resilience may be what we need to soften any downturn in 2023.”

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