UK consumer confidence hits highest level since April 2022

UK consumer confidence rebounded in February to its highest level in almost a year, in a sign of households’ resilience despite the cost of living crisis, according to data published on Friday.

Research group GfK said its index of consumer confidence, a closely watched measure of how people view their personal finances and wider economic prospects, rose by seven points to -38.

Beating consensus forecasts of -43, that is the highest reading since April 2022 for the index, which fell to a near-record low in January. The measure remained well below zero, however, indicating that most respondents reported a decline in confidence.

Joe Staton, GfK’s client strategy director, said that although February’s score was “still severely depressed”, consumers had “suddenly shown more optimism about the state of their personal finances and the general economic situation, especially for the coming year”.

Respondents to the survey, based on interviews conducted between February 1 and 13, were more optimistic about the year ahead, as the sub-index measuring their general outlook on the future economic situation jumped by 11 points between January and February.

Consumers also reported recovering confidence in their personal finances, as well as a growing willingness to make expensive purchases.

The savings index, which measures how likely consumers are to put away money but is not included in the overall score, increased from 14 to 19 — a level five points higher than in February last year.

The uptick across all five measures included in the overall index suggested that consumers might experience “a milder recession than the pundits predicted”, said Staton.

The survey follows a string of encouraging official data, showing that the UK avoided a contraction in the final quarter of 2022, while the labour market remained resilient despite economic headwinds.

Headline inflation declined to 10.1 per cent in January, down from its 41-year peak of 11.1 per cent in October, the Office for National Statistics said last week.

Meanwhile, the public finances registered a surprise £30bn windfall in the fiscal year to January, the ONS said on Tuesday, gifting chancellor Jeremy Hunt scope to provide extra support to households in his spring Budget on March 15.

Overall, consumer confidence in February was 12 points lower than in the same month in 2022, as soaring energy bills and higher interest rates and food prices squeezed household budgets over the past 12 months.

“[Consumer] mood as well as the economy remain a long way off pre-lockdown levels,” said Staton, “but a little consumer resilience might be what we need to soften any downturn in 2023.”