Consumer confidence edged higher as shoppers braced for a round of pre-Christmas spending despite soaring inflation and the prospect of rate hikes, a closely watched survey showed.
The GfK Consumer Confidence Index rose three points to -14 this month, reversing a three-month losing streak.
The survey’s key purchasing index – a measure of preference for big-ticket items – jumped seven points and is now 25 points higher than it was this time last year. The reading will serve as a tip for retailers ahead of next week’s Black Friday shopping event and the Christmas and New Year period.
Consumer’s view of the general economic situation in the past year and the next 12 months also improved, by 6 points and 3 points respectively.
GfK’s relatively positive findings show that many workers appear to have shrugged off the cost of their home energy bills, gasoline and diesel, used cars, food and a host of other products and services. increase.
Data from the Office for National Statistics this week showed the consumer price index rose to 4.2 percent in October, its highest level in a decade.
Expectations are growing that the Bank of England’s monetary policy committee will raise interest rates from a record low 0.1% next month. Andrew Bailey, the bank’s governor, recently said he was “very uneasy” about the inflation outlook and the decision to leave rates unchanged two weeks ago was a call to close.
The vibrant labor market is pushing up the general price level, but at the same time, it also causes workers to flow more money. Job vacancies rose to a record 1.17 million, up 388,000 from pre-pandemic levels. The unemployment rate fell half a percentage point to 4.3% over the past three months, while average weekly earnings rose 5.8% year-on-year.
Joe Staton, director of client strategy at GfK, said: “Consumer sentiment is high this month despite decades of high inflation, concerns about higher prices and worries about rising interest rates. and as the cost of living deepens, UK household finances take a hit. worse this winter. “
People are less optimistic about their financial situation than the economy as a whole. The GfK index, which measures attitudes towards personal finance, fell two points to -7, while the forecast for the next 12 months rose one point to 2.
“The view on the overall economic situation over the past year and into the years ahead has been better, but consumers are less worried about their personal finances,” said Staton. This weakness is important, as it reflects a daily savings or spending plan and is a strong driver of overall UK economic growth.
“A highlight for both physical and virtual retail was a seven-point increase in major purchase intentions in the run-up to Black Friday and Christmas. Is this a sign that the shopper is ready to return? That’s the way it is, but consumers also know that when the festivities are over, it’s going to be a rough year in 2022.”
