UK consumer confidence has sharpest rebound in almost two years

UK household confidence rebounded by the most in almost two years in February as signs started to emerge that the worst bout of inflation in four decades is starting to ease.

GfK’s consumer confidence indicator jumped seven points to a minus 38. While that was a 10-month high, it remained close to the historic lows triggered by the cost-of-living crisis. The pace of increase was the largest since March 2021.

The rebound suggests resilience among households that may help prop up the economy through what’s expected to be one of the longest slumps on record. It also points toward continued spending, which may concern the Bank of England as it weighs how much to raise interest rates in its fight against inflation.

“Consumers have suddenly shown more optimism about the state of their personal finances and the general economic situation, especially for the coming year,” said Joe Staton at GfK. “While it’s too early to talk about ‘green shoots of recovery’, the uptick across all measures should be welcomed.”

The survey showed a sharp improvement in expectations for personal finances and the economic backdrop over the next 12 months amid predictions of falling energy bills and a rapid decline in inflation.

“Many consumers continue to take steps to reduce spend where they can – switching where they shop, what they buy, whilst also cutting back on some activities, such as eating out and takeaways,” said Linda Ellett, UK head of consumer markets, Retail and Leisure for KPMG. BLOOMBERG

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