Rise in consumer confidence gives hope for summer spending boost

UK consumer confidence rose by two points in May in a sign that Brits are becoming increasingly hopeful about their financial position ahead of the summer months. 

GfK’s consumer confidence reading came in at -17 for May, an improvement from -19 in April and -21 points in March. 

The figure is up by ten points when compared to exact same period the year before, as cooling inflation improves consumer sentiment. 

Its major purchase index – which takes the temperature on Brits likeliness to make large purchases – also rose by one point to -26 after rising the month prior.

Joe Staton, client strategy director GfK, said: “With the latest drop in headline inflation and the prospect of interest rate cuts in due course, the trend is certainly positive after a long period of stasis which has seen the Overall Index Score stuck in the doldrums. 

“All in all, consumers are clearly sensing that conditions are improving. This good result anticipates further growth in confidence in the months to come.”

Earlier this week it was revealed that inflation cooled to the lowest level in nearly three years in April. 

Consumer Price Index inflation slowed to 2.3 per cent during the month, down from 3.2 per cent in March.

While the figure falls much closer to the Bank of England’s inflation target of two percent, it was still higher than what economists expected, who thought it would come in at 2.1 per cent.

Linda Ellett, UK head of consumer, retail and leisure for KPMG, said: “Inflation is slowing and the mood music for the UK economy is getting more upbeat.  But gradually increasing confidence levels are yet to translate into a notable uplift in discretionary spending, generally.  

With costs still heightened and some people still having to adjust to higher mortgage costs, the challenge for consumer spending is whether any future lowering of costs ends up being saved rather than spent. 

She added: “Over the coming weeks, retail and hospitality businesses will be hoping that purchases related to healthy summer holiday demand, combined with Euro 2024 and hopefully some sunshine, provide a stimulus for increased summer spending.”