UK Consumer Confidence Recovery Continues As Optimism About 2024 Grows
- Written by: Sam Coventry
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The recovery in consumer confidence extended into December, according to a much-watched survey.
GfK's composite index of consumers' confidence rose to -22 in December, from -24 in November, which was a marked improvement on October's reading and suggests a trend is establishing.
This brings the headline figure close to a two-year high (-21).
"The ongoing recovery in consumers’ confidence adds weight to our view that households’ spending will partially rebound in Q4, supported by an increase in real wages," says Gabriella Dickens, Senior UK Economist at Pantheon Macroeconomics.
GfK says an improvement in UK consumer confidence is driven by improvements in the expectations for the coming year for both the economy (-25, up from -26) and personal finances (-2, from -3).
"The improvement in confidence makes sense, given the recent sharp slowdown in the pace of consumer price rises and the payment of a further £300 Cost of Living grant to recipients of working-age benefits in November," says Dickens.
Pantheon Macroeconomics says the overall value of the cost of living payments to households will increase to 1.2% of aggregate household disposable incomes in Q4, from 0.3% in Q3.
Furthermore, Pantheon sees a 1.5% year-over-year increase in real household disposable income in 2024 as average weekly pay growth will continue to outpace CPI inflation.
The cost of living payments will cease after Q1, but benefit payments will rise by 6.7% in April, and the main rate of National Insurance contributions will fall by 2pp in January.
The OBR estimates that changes to tax rates and benefit payments will collectively boost disposable incomes by 0.6% in 2024/25.
Pantheon says the drag on quarter-on-quarter growth in GDP from mortgage refinancing will ease to about 0.1pp in 2024, from 0.2pp this year.
"Accordingly, we expect consumers’ confidence to continue to recover next year, supporting around a 1.2% year-over-year rise in real household expenditure," says Dickens.
