Consumer confidence in the UK rises to the highest level in more than a year

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

Research team GfK said on Friday that its consumer confidence index rose 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, director of client strategy at GfK, said the increase in trust was “encouraging”. He added that while the score was still negative, “the overall trajectory this year is positive and could reflect a stronger underlying financial picture across the UK than many think.”

British expectations for the general economy and their personal finances are up sharply by four and five points respectively from last month. The index that tracks consumer sentiments about whether this is a good time for big purchases also rose four points to minus 24.

Consumer spending remains depressed. In the first quarter of this year, it was still more than 2% below the level of the last quarter of 2019, before the coronavirus pandemic hit, with high inflation straining household budgets.

Most economists believe that 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 decline in inflation as energy prices continue to fall from their peak. Meanwhile, the labor market remains strong, helping to support household incomes.

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

Ellie Henderson, an economist at Investec, said a string of slightly stronger 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 at this time last year,” she said.

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said low-income households in particular “have probably become a little more optimistic” after a 10% rise in the value of benefit payments since April and continued government support for energy bills.