UK household confidence has shot up to its highest level since Russia’s invasion of Ukraine, signaling some optimism for the consumer sector after an especially wet March pushed retail sales down more than expected.
(Bloomberg) — UK household confidence has shot up to its highest level since Russia’s invasion of Ukraine, signaling some optimism for the consumer sector after an especially wet March pushed retail sales down more than expected.
GfK’s consumer confidence index rose six points to minus 30 in April, a 14-month high and the third consecutive improvement. It showed consumers were becoming more upbeat about the economy’s prospects and more willing to make big-ticket purchases.
Figures were stronger than the reading of minus 35 that economists had expected and add to evidence that households are holding up against double-digit inflation. It adds to data out earlier in the week showing surprisingly strong wage growth and inflation. Together, the reports suggest the Bank of England may have further work to prevent prices from spiraling upwards.
“There’s a sudden flowering of optimism with big improvements across the board,” Joe Staton at GfK said in a statement Friday. “The eight-point jump in how we see prospects for our personal financial situation is a dramatic change that might suggest household finances are stronger than we thought.”
The consumer data offered some optimism for UK retailers after a disappointing March, with retail sales falling more than forecast amid frequent rain. The volume of goods sold in stores and online dropped 0.9% from February, the Office for National Statistics said Friday, compared with an expected decline of 0.5%.
“Poor weather impacted on sales across almost all sectors,” said Darren Morgan, ONS director of economic statistics. “Food store sales also slipped, with retailer feedback suggesting the increased cost of living and climbing food prices are continuing to affect consumer spending.”
The retail sales data underscore the fragile nature of the UK’s recovery from the pandemic and the war, which drove up food and fuel prices and prompted the BOE to raise interest rates. The stronger consumer confidence shown by GfK by could give Prime Minister Rishi Sunak and Chancellor the Exchequer Jeremy Hunt hope that warmer whether could help keep the economy out of recession.
The GfK index has improved in six of the last seven months, after falling to a record low last year.
“Consumer confidence continues to climb but still has an upward path ahead to recovery,” said Linda Ellett, UK head of consumer markets for retail and leisure at KPMG. “Confidence continues to be challenged by inflation and interest rates remaining elevated, while many households also face increases in their energy, mobile and broadband costs from this month.”
Read more:
- BOE Official Likens UK Rate Hawks to ‘Fool in the Shower’
- Wet Weather Adds to Woes for UK Retailers as Sales Drop
- Surging UK Prices Defy Efforts by Sunak, BOE to Tame Inflation
(Updates with retail sales data from first paragraph.)
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