UK consumer confidence rises to highest level since Ukraine invasion

UK consumer confidence continued to recover in April, climbing to its highest level since Russia launched its invasion of Ukraine in February 2022, according to data on Friday.

Research group GfK said its index of consumer confidence, a closely watched indicator of how Britons view their personal finances and wider economic prospects, rose by six points to -30 this month.

The index plunged to record lows in 2022, as Moscow’s offensive sent energy prices soaring and accelerated the rising cost of goods, putting pressure on household budgets.

Ashley Webb, UK economist at Capital Economics, said the uptick resulted from “fast wage growth, due to the tight labour market, and government handouts supporting nominal household incomes”.

In its spring Budget, the government said it would continue to subsidise households’ energy bills through its price guarantee for three extra months from April to June.

The GfK index showed that consumer confidence increased for a third consecutive month and surpassed analysts’ consensus forecast of -35. However, it remained well below zero, indicating that most respondents were downbeat about their personal finances and wider economic conditions.

“There’s a sudden flowering of optimism with big improvements across the board,” said Joe Staton, client strategy director at GfK.

Households were less pessimistic about their financial situation over the next 12 months, with the sub-index for this measure jumping by eight points to -13. Respondents, who were surveyed between April 3 and 13, were also more willing to make big purchases at any point in the previous year.

But people’s appetite for buying expensive items “will be dependent on whether and when essential costs stabilise or fall”, noted Linda Ellett, UK head of consumer markets, retail and leisure at KPMG.

“Confidence continues to be challenged by inflation and interest rates remaining elevated,” added Ellett.

UK inflation stood at 10.1 per cent in March, only slightly down from 10.4 per cent in February, according to the Office for National Statistics.

Food prices rose 19.1 per cent in the year to March, putting pressure on household budgets and eroding people’s disposable income and ability to save.

The Bank of England is expected to increase interest rates beyond the current 4.25 per cent when the Monetary Policy Committee meets again on May 11.