UK consumer confidence jumps on stronger-than-expected economic rebound
UK consumer confidence rose for the sixth consecutive month in July thanks to a much faster-than-initially expected economic recovery.
GfK’s latest consumer confidence index edged up two basis points to minus seven this month, marking the sharp improvement in household prospects since Covid was initially unlocked in April this year.
The index is now 20 basis points higher than it was a year ago, illustrating the extent of the economic rebound since the early stages of the pandemic.
Read more: UK economy grows 0.8% in May
The reopening of many sectors of the UK economy is improving consumers’ expectations of their personal finances as more people return to work after leave and restore their incomes to pre-Covid levels.
The Top Buy Index, a barometer of whether households plan to buy an expensive product in the coming months, gained seven basis points, indicating that consumers are ignoring recent price hikes and are continuing to make major purchases.
The latest data from the Office for National Statistics shows that inflation rose 2.5% per year in June, above the Bank of England’s target range.
Joe Staton, Director of Client Strategy at GfK, said: “Personal finance expectations for next year remain high and there is a dramatic jump this month in our major purchasing sub-measure, buyers agreeing that now is the “right time to buy”.
Read more: UK inflation hits 2.5% in June
“The healthy seven point increase aligns with strong retail growth figures that reflect the gradual unlocking of UK Main Street and the release of pent-up demand as Brits hit shops, restaurants and places. “
Soaring Covid rates deteriorate economic outlook
The increase in the number of Covid cases driven by the Delta variant is fueling fears that policymakers may be forced to reintroduce restrictions on economic activity to curb infections, GfK research has shown.
Consumers’ outlook for the overall economic situation over the next year has fallen from three basis points over the past month to minus five.
“Threats of rising consumer price inflation, variants of Covid and rising infection numbers, the imminent end of holidays and the job retention program, could slow this rebound.” , Staton said.
The gradual reduction in government support measures increases uncertainty about household finances, especially among workers who have spent long periods on leave.
Businesses are also likely to struggle under the weight of higher costs and debt, which means they could lay off staff to protect their bottom line.
The savings index was still high at 20, suggesting that households may continue to save during the pandemic.
Read more: Job losses could increase as leave support declines from today