The GfK consumer sentiment indicator for September climbed to -21, marking the second consecutive monthly increase and the most positive reading since January last year, up from -25 in August.
Households’ expectations for their personal financial situations in the coming year also improved slightly, moving from -3 to -2. This contrasts with a reading of -40 a year ago when energy prices skyrocketed.
Joe Staton, GfK’s client strategy director, highlighted that while the uptick in the headline score is positive, many households are still grappling with the cost-of-living crisis, and economic conditions remain challenging.
Consumer price inflation dropped to 6.7% in August but remains above the Bank of England’s target, while separate ONS figures reveal a 0.4% increase in British retail sales in August, driven by food and clothing purchases.
Economist Thomas Pugh at RSM UK expressed hope for consumer spending in the coming year as real wages rise, although he cautioned that many consumers might opt to save additional income due to lingering confidence concerns and rising housing costs.
In a surprise move, the Bank of England left interest rates unchanged at 5.25%, ending a series of increases expected by analysts. Pugh suggested that despite rising wages, many households may prioritize savings over spending due to ongoing economic uncertainties.