By Ed Frankl
Confidence among U.K. consumers improved for the fifth month in a row in June, with Britons feeling more confident about their future financial situation, despite being squeezed on the cost of living via stubbornly high inflation and climbing interest rates.
Research firm GfK said its consumer-confidence barometer stood at minus 24 in June, compared with minus 27 a month earlier, higher than expectations from economists polled by The Wall Street Journal, also at minus 27.
The news comes a day after the Bank of England raised interest rates more than expected, to 5.0% from 4.5%, in an attempt to confront inflation which in May came in hotter than expected.
The higher rates will further squeeze household spending in the coming months as the specter of a mortgage crisis looms. However, interviews for this month’s survey were conducted between June 1 and June 14, GfK said, well ahead of the rate decision and most recent inflation data.
GfK’s reading is the highest since the minus 19 registered in January 2022, but remains downbeat by historical standards, as confidence recovers from a record low of minus 49 in September. That period was marked by sky-high energy prices, as gas prices spiked in the months after Russia’s invasion of Ukraine.
“Despite the fierce economic headwinds of the cost-of-living crisis, double-digit grocery-price increases, and the mortgage squeeze severely impacting both homeowners and renters alike, the U.K. consumer confidence index has improved by another three points in June,” GfK Client Strategy Director Joe Staton said.
The improvement in the index was driven by consumers’ better assessment of their personal financial situation over the next 12 months, which climbed seven points compared with May to minus 1, almost into positive territory for the first time since 2021.
Respondents also reported improved sentiment about the general economic situation over the next 12 months and their personal financial situation over the last 12 months, though it declined slightly in the index for propensity to make major purchases.
But with inflation stuck at high levels, and particularly with underlying pressures not subsiding, the suggestion is that purchasing power could continue to be hindered in the coming months. Inflation remained at 8.7% in May, the same level as in April, according to data from the Office for National Statistics published earlier this week.
“Consumers are showing remarkable resilience in the face of inflation that is currently refusing to yield… if consumers continue to weather the current economic storm, then this will provide a firm foundation for getting back to growth,” Staton said.
Write to Ed Frankl at [email protected]
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