UK consumer confidence still a long way from any "sunny uplands"

(Alliance News) - A survey on Friday showed that UK consumer confidence in the year ahead is continuing to recover, despite record levels of inflation weighing down on the country's households.

GfK's Consumer Confidence Index rose by three points in May to minus 27, the fourth monthly increase in a row from January's minus 45.

Russ Mould, investment director at AJ Bell, said the print was "impressively resilient" and may become more "material" if inflation in the UK starts to retreat from double-digit highs.

The UK inflation in March stood at 10.1%, above the 9.7% the Bank of England's forecast for the first-quarter average and well above its overall target of 2%.

Confidence in personal finances over the coming 12 months saw a robust five-point jump to minus 8, 17 points higher than this time last year.

Expectations for the general economic situation over the next year increased by four points, remaining at a firmly negative minus 30, but 26 points higher than last May.

Pantheon Macroeconomics' chief UK economist, Samuel Tombs, said the increase in GfK's measure of consumer confidence to a 15-month high "makes sense" given that a GBP301 cost of living grant for most low-income households hit bank accounts just as the survey was conducted in the first two weeks of May.

"That said," Tombs continued, "it might be overstating the recovery, as the composite index is not seasonally adjusted and has risen by an average of 1.6 points in May across the 2000s and 2010s. Note too, that confidence still is very weak by past standards; the headline index remained well below its average since 1974, minus 10."

GfK client strategy director Joe Staton admitted that the headline score of minus 27 means that the UK is still "a long way from any sunny uplands" but argued that, as the overall trajectory is positive, this might reflect a stronger underlying financial picture than "many would think."

"But everybody must hold on tight as it could still be a rocky ride out of these tough times," he said.

By Heather Rydings, Alliance News senior economics reporter

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