LONDON, – The mood of British consumers experienced a positive shift this month, driven by lower inflation which led individuals to feel more optimistic about their personal financial prospects. However, overall sentiment remains subdued due to concerns about the broader economy, as indicated by a survey released on Friday.
The GfK consumer sentiment indicator climbed to -25 in August from a three-month low of -30 in July, marking its most significant increase since April. Nonetheless, this reading remains below the historical average of -10 for the survey, which has been ongoing since 1974.
“While the nation’s financial health remains fragile, these glimmers of optimism are encouraging amid the current challenging circumstances faced by consumers across the UK,” noted Joe Staton, GfK’s Director of Client Strategy.
Households’ expectations for their personal financial situation over the upcoming year improved to -3 from -7, a substantial improvement from the reading of -31 recorded a year ago. During that period, energy prices were soaring, and the government had not yet introduced its subsidy program.
Consumer price inflation decreased to 6.8% in July, down from the 41-year peak of 11.1% reached in October 2022. However, it remains higher than levels observed in most other major economies.
Wage growth has now nearly matched inflation for the first time in almost two years. Nevertheless, the Bank of England, which recently raised interest rates to a 15-year high of 5.25%, is concerned about the rapid escalation of salary increases.
This improvement in the GfK survey contrasts with other recent pessimistic data concerning consumer spending. Retail sales volumes fell 1.2% in July, partly attributed to unusually wet weather following a heatwave the previous month. Additionally, data from industry provider NIQ revealed that supermarket spending in the four weeks up to August 12 grew at its slowest pace since January.
The GfK data was derived from a survey involving 2,001 participants conducted between August 1 and August 10.
Separate data released on Friday by Britain’s Recruitment and Employment Confederation showed that early August saw 29% more new job advertisements compared to the same period the previous year. The survey also indicated the existence of 2.3 million active job postings, reflecting a 60% increase from a year earlier and more than double the vacancies reported by the Office for National Statistics for the three months leading up to July.
