British consumer confidence rose for the fourth consecutive month in May to the highest level since Russia’s full-scale invasion of Ukraine, according to a closely watched barometer.
Research group GfK said on Friday its consumer confidence index rose three points to minus 27 this month, continuing its improvement since hitting a low of minus 45 in January.
The latest reading was the highest since February 2022, just before the Kremlin sent its troops to Ukraine, sending energy prices skyrocketing.
Joe Staton, director of client strategy at GfK, said the surge in confidence was “encouraging”. He added that while the score was still negative, “the overall trajectory this year is positive and may reflect a stronger underlying financial picture across the UK than many would think”.
British expectations for the general economy and their personal finances rose sharply by four and five points respectively compared to last month. The index that tracks consumer sentiment on whether now is a good time to make 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% lower than the level of the last quarter of 2019, before the coronavirus pandemic hit, with high inflation weighing on household budgets.
Most economists believe 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 drop in inflation as energy prices continue to fall from their peak. In the meantime, the labor market remains strong, helping to support household incomes.
Last week the Bank of England amended its economic outlook and said it no longer expects a recession.
Ellie Henderson, an economist at Investec, said the slightly stronger set of economic data this year had changed expectations. “The consumer environment is undoubtedly 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 bit more optimistic” after a 10% increase in the value of benefit payments from April. and continued state support for energy bills.