UK consumers showing ‘renewed optimism’ over economic outlook

Despite the positivity, experts warn costs remain elevated and will continue to test many household budgets for months to come

A third of consumers in a KPMG survey are shopping at lower-cost retailers or buying cheaper branded goods. Reuters

Confidence among UK consumers is showing “renewed optimism” against a backdrop of falling core inflation, new figures suggest.

GfK’s long-running Consumer Confidence Index improved overall by five points in August, with all measures reversing the drop seen in July. However, it remains firmly in negative territory at minus 25.

There was an increase of three points to minus 30 in confidence in the general economic situation for the next 12 months – 30 points better than last August – against a backdrop of falling core inflation, higher interest rates and rising average weekly earnings, GfK said.

The forecast for personal finances over the coming year increased four points to minus three – 28 points higher than this time last year.

Meanwhile, the major purchase index, a measure of confidence in buying big-ticket items, rose eight points to minus 24, 14 points higher than this month last year.

“Although the headline figure remains strongly negative at minus 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,” Joe Staton, client strategy director at GfK, said.

“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.”

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“Consumer price inflation is slowing, but costs remain elevated and will continue to test many household budgets for months to come,” Linda Ellett, UK head of retail and leisure consumer markets for KPMG, said.

“This prolonged pressure has already led nearly 40 per cent of consumers that KPMG surveyed to buy more value produce this year, with the same amount buying more promotional items.

“Plus a third of consumers reported they are shopping at lower-cost retailers or buying lower-cost branded goods.

“These actions have helped some households to manage their budget and will continue to do so, but other consumers still face far more significant price hikes in the likes of mortgage or rent – which are far harder to manage and will inevitably impact consumer spending further.”