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UK client confidence rose greater than anticipated in August, helped by decrease vitality costs and accelerating wage progress.
The patron confidence index — a measure of how individuals view their private funds and broader financial prospects — rose 5 factors to minus 25, recovering a lot of the floor misplaced in July and returning to in regards to the ranges seen initially of final yr, analysis group GfK stated on Friday.
The determine was stronger than the marginal uplift to minus 29 forecast by economists polled by Reuters.
Client confidence “regained momentum this month with a welcome five-point enchancment”, stated Joe Staton, consumer technique director at GfK. “Whereas the monetary pulse of the nation continues to be weak, these indicators of optimism are welcome throughout this difficult time for shoppers throughout the UK,” he added.
Some economists attributed the development to an easing of the price of dwelling disaster. In July inflation dropped to six.8 per cent, the bottom price since February final yr and down from a peak of 11.1 per cent in October.
Wages increased on the quickest tempo on document within the three months to June, rising extra shortly than costs for the primary time in a few yr and a half.
Gabriella Dickens, an economist at Pantheon Macroeconomics, stated confidence was boosted by the decline in mortgage rates over the previous month, alongside the autumn in vitality payments in July.
The figures recommend “the price of dwelling disaster is coming to an finish”, stated Ruth Gregory, an economist on the consultancy Capital Economics.
Nonetheless, she warned that “client confidence could deteriorate once more within the coming months as a consequence of additional rises in unemployment, falls in home costs and nonetheless rising rates of interest”.
The Financial institution of England is predicted to boost rates of interest in September for the fifteenth consecutive time since December 2021.
Client confidence is an indicator of willingness and talent to spend, which issues for financial progress as family spending accounts for a big a part of gross home output. It has been undermined by hovering meals and vitality costs, which surged to multi-decade highs following Russia’s invasion of Ukraine.
The GfK index, based mostly on interviews carried out within the first half of the month, confirmed that every one sub-indices improved in August. Expectations for private funds over the approaching yr rose by 4 factors to minus three, the closest to a optimistic studying since January 2022. Expectations for the economic system extra typically had been additionally up.
The measure monitoring spending intentions rose by eight factors, which is “probably higher information for retailers as we transfer into autumn”, stated Staton.