Consumers gain confidence in economy – but not their wallets

Consumers’ thawing attitude towards the UK economy has powered a modest two-point boost to their overall spending confidence, according to GfK’s latest barometer.

The GfK consumer confidence index increased two points to -18 in June, thanks to improvements in consumers’ opinions of the general economic situation.

The bounce was particularly strong when looking forward to the next 12 months, with consumer confidence rising five points to its highest tide so far this year.

The improvement in confidence even spread to consumers’ sour opinion of the past 12 months’ economic performance, nudging up three points to -43. While very negative, the score is among the highest it has been since the beginning of the pandemic.

Consumers’ confidence in their personal financial situation and ability to make major purchases, however, remained stagnant. 

Despite the growth in confidence since April, GfK consumer insights director Neil Bellamy warned businesses against seeing any “light at the end of the tunnel”.

“Consumers have been resolute in their views on their wallets,” he said.

“Yet confidence is still fragile because the dark shadow of inflation is a day to day challenge for so many of us. With petrol prices set to rise in the coming weeks following the escalation of the conflict in the Middle East, and with ongoing uncertainty as to the full impact of tariffs, there is still much that could negatively impact consumers. 

“With so much volatility, now is certainly not the time to hope for the proverbial ‘light at the end of the tunnel’.”

May’s ONS inflation data, released on Wednesday, showed that the headline rate of CPI continued to rise at a steady rate of 3.4%.

Despite inflation coming in line with expectations, ahead of the Bank of England’s target rate of 2%, the BoE decided to maintain its 4.25% base rate of interest in a “gradual and careful approach” to tackling inflation, given global uncertainties and growing energy prices caused by conflict in the Middle East.