UK consumer confidence jumps on stronger than expected economic rebound

UK consumer confidence rose for the sixth month in a row in July driven by the economy recovering much faster than initially expected.

GfK’s latest consumer confidence index edged up two points to minus seven this month, marking the strong improvement in households’ outlook since the initial Covid unlocking in April of this year.

The index is now 20 points higher than it was a year ago, illustrating the scale of the economic rebound from the early stages of the pandemic.

Read more: UK economy grows 0.8 per cent 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 from furlough and restore their income to pre-Covid levels.

The major purchase index, a barometer for whether households expect to buy an expensive product in the coming months, gained seven basis points, indicating that consumers are shrugging off recent price rises and pushing ahead with big ticket purchases.

Latest data from the Office for National Statistics shows inflation rose 2.5 per cent annually in June, higher than the Bank of England’s target range.

Joe Staton, client strategy director at GfK, said: “Personal finance expectations for the next year remain strong and there’s a dramatic jump this month in our major purchase sub-measure with shoppers agreeing that now is the ‘right time to buy’.

Read more: UK inflation hits 2.5 per cent in June

“The healthy seven-point rise aligns with strong retail growth figures that reflect the gradual unlocking of the UK high street and release of pent-up demand as Brits hit shops, restaurants and venues.”

Surging Covid rates sours economic outlook

Surging Covid case numbers driven by the Delta variant is stoking fears that policymakers may be forced to reintroduce restrictions on economic activity to curb infections, GfK’s research showed.

Consumers’ outlook for the general economic situation over the next year fell three basis points over the last month to minus five.

“Threats from increasing consumer price inflation, Covid variants and rising infection figures, the looming end of furlough and the Job Retention Scheme, could put the brakes on this rebound” Staton said.

The winding down of government support measures is increasing uncertainty about household finances, particularly among workers who have spent long periods on furlough.

Businesses are also likely to struggle under the weight of heavier cost and debt burdens, meaning they could lay off staff to protect bottom lines.

The saving index was still high at 20, suggesting households may continue with savings habits picked up during the pandemic.

Read more: Job losses could surge as furlough support reduces from today