UK consumer confidence rises to highest level in more than a year

UK consumer confidence rose for the fourth consecutive month in May to the highest level since Russia’s full-scale invasion of Ukraine, according to a closely watched barometer.

Research group GfK said on Friday that its consumer confidence index rose by three points to minus 27 this month, continuing the improvement since it hit a low of minus 45 in January.

The latest reading was the highest since February 2022, just before the Kremlin ordered its troops into Ukraine, sending energy prices soaring.

Joe Staton, GfK’s client strategy director, said the rise in confidence was “encouraging”. He added that while the score was still negative, “the overall trajectory this year is positive and might reflect a stronger underlying financial picture across the UK than many would think”.

Britons’ expectations for the general economy and their personal finances rose sharply by four and five points respectively from last month. The index tracking consumers’ views on whether this is a good time for big purchases also increased by four points to minus 24.

Consumer spending remains depressed. In the first quarter of this year, it was still more than 2 per cent below the level in the final quarter of 2019, before the coronavirus pandemic hit, with high inflation putting a strain on household budgets.

Most economists believe the outlook for the UK economy over the next 12 months is improving. Official data for April, due out next week, is expected to show a sharp drop in inflation as energy prices continue to fall from their peak. Meanwhile, the labour market remains strong, helping to support household incomes.

Last week, the Bank of England revised up its economic outlook and said it no longer expected a recession.

Ellie Henderson, an economist at Investec, said the slightly stronger set of economic data this year had changed expectations. “The consumer environment is no doubt still challenging, but there are brighter sparks of optimism than we would have imagined this time last year,” she said.

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said that low-income households in particular “probably have become a bit more upbeat” following a 10 per cent rise in the value of benefit payments from April and continued state support for energy bills.