Improving Personal Finances Boost UK Consumer Confidence to Two-year Highs
- Written by: Sam Coventry
-
Image © Adobe Stock
In a boost to the UK economic outlook, consumer optimism for the coming 12 months has strengthened amidst improved personal finances, taking overall confidence to a two-year high in January.
GfK's long-running consumer confidence survey read at -19, the highest level since January 2022.
"Importantly, the view on our personal financial situation for the coming year has gained two points and now stands at zero. This is exciting as it ends 24 consecutive months of negative scores," says Joe Staton, Client Strategy Director GfK.
He explains this significant change is the best single indicator for how the nation’s households feel about their income and expenditure.
"Despite the cost-of-living crisis still impacting many households across the UK, consumers appear to be encouraged by the positive news about falling inflation," says Staton.
"Consumers are finally starting to feel better about their prospects and we can expect improved sales performance over the coming months for the UK's hard-pressed retailers," says a note from Promocodius.
GfK's index measuring changes in personal finances during the last year is up two points at -12; this is 19 points better than January 2023. The findings come after UK inflation was at 4.0% year-on-year in December, which is below the level of regular earnings at 6.6%, meaning real earnings continue to rise.
"Two-year high in UK consumer confidence is consistent with the recent return to real income growth. Whilst inflation looks set to tick higher in January (I’d expect CPI at 4.3%; after 4.0% Dec), the path thereafter should resume downwards," says Simon French, Economist at Panmure Gordon.
GfK's forecast for personal finances over the next 12 months increased two points to the value of 0, which is 27 points higher than this time last year.
Expectations for the general economic situation over the next 12 months have increased by four points to -21; this is 33 points better than January 2023.
There is some hope for the UK's struggling retail sector with GfK's Major Purchase Index moving up three points to -20; this is 20 points higher than this month last year.