British consumer sentiment hit its highest level since January 2022 as households turn more optimistic about their finance and economy, despite stubborn inflation and rising interest rates, market research firm GfK said last week.
GfK’s headline confidence index rose for the fifth month in a row to -24 in June from -27 in May, moving further away from the -49 record low last September when former prime minister Liz Truss’s economic plan caused turmoil in financial markets. June’s rise was above the -26 forecast in a Reuters poll of economists.
While British consumer price inflation has eased from the 41-year high of 11.1 per cent, households are still grappling with the highest inflation rate among major rich economies, running at 8.7 per cent in May, unchanged from April.
Commenting on the figures, Joe Staton, GfK’s client strategy director, said consumers were showing “remarkable resilience” in the face of price rises that have proven more enduring than initially thought.
“If consumers continue to weather the current economic storm, then this will provide a firm foundation for getting back to growth,” Staton said.
Britain’s economy has so far avoided forecasts of a recession and GfK’s measure of how consumers view the economy in the 12 months ahead increased to -25 from -30 in May while feelings about their personal finances rose by seven points to -1.
However, some economists have said the Bank of England, which raised interest rates by a bigger-than-expected 50 basis points last week to 5 per cent, risks causing a recession. GfK said three measures of consumer sentiment edged up in June compared to the previous month when all five indicators pushed up. Shoppers’ willingness to make expensive purchases fell while its gauge of savings intentions rose.
It comes as latest figures showed that British retail sales in May defied expectations by posting a surprising increase, buoyed by an additional bank holiday celebrating the coronation of King Charles. The data suggests that most consumers were managing to cope with the squeeze on their spending power caused by high inflation. According to latest data from Office for National Statistics revealed a monthly increase of 0.3 per cent in retail sales volumes for May. This positive growth follows a rise of 0.5 per cent in April.