Consumer Confidence Improves But Inflation Clouds Outlook

Consumer confidence in the UK has strengthened to its best level since December, buoyed by the Bank of England’s recent interest rate cut, although concerns over inflation and potential tax rises continue to weigh on sentiment.

GfK’s Consumer Confidence Index rose to –17 in August, up from –19 in July, marking the strongest reading in eight months. The improvement was underpinned by more positive views on personal finances, with expectations for the coming year reaching +5.

Neil Bellamy, consumer-insights director at GfK, said: “Consumer confidence continues to move in a very narrow band, and there's no sense that it is about to break out into fresher, more optimistic territory. Households remain in wait-and-see mode, and any surprises could cause sudden and sharp changes in sentiment.”

He pointed to inflationary pressures—July’s inflation rate rose to 3.8 per cent, the highest since January 2024—as well as speculation about potential tax rises in the autumn Budget as risks to confidence in the months ahead.

The survey, which interviewed just over 2,000 adults between 1 and 14 August, found that both retrospective and forward-looking confidence in personal finances rose by three points.

Broader measures, however, painted a less upbeat picture. Confidence in the general economic situation over the past year stood at –42, while expectations for the next 12 months slipped slightly to –30. Meanwhile, the major purchase index, which tracks willingness to spend on high-value items, improved to –13 but remains in negative territory.

The recent decision by the Bank of England to lower interest rates from 4.25 per cent to 4 per cent has helped lift household sentiment, but analysts warn that optimism remains fragile. With inflation stubbornly above target and uncertainty over fiscal policy, consumer confidence could face renewed pressures in the months ahead.

Source: The Standard