Published On : 06/23/2023

UK consumer morale touches 17-month high despite inflation pain – GfK

By Suban Abdulla

LONDON (Reuters) – British consumer sentiment hit its highest level since January 2022 as households turn more optimistic about their finance and economy, despite stubborn inflation and rising interest rates, market research firm GfK said on Friday.

GfK’s headline confidence index rose for the fifth month in a row to -24 in June from -27 in May, moving further away from the -49 record low last September when former prime minister Liz Truss’s economic plan caused turmoil in financial markets.

June’s rise was above the -26 forecast in a Reuters poll of economists.

While British consumer price inflation has eased from the 41-year high of 11.1%, households are still grappling with the highest inflation rate among major rich economies, running at 8.7% in May, unchanged from April.

However, Joe Staton, GfK’s client strategy director, said consumers were showing “remarkable resilience” in the face of price rises that have proven more enduring than initially thought.

“If consumers continue to weather the current economic storm, then this will provide a firm foundation for getting back to growth,” Staton said.

Britain’s economy has so far avoided forecasts of a recession and GfK’s measure of how consumers view the economy in the 12 months ahead increased to -25 from -30 in May while feelings about their personal finances rose by seven points to -1.

However, some economists have said the Bank of England, which raised interest rates by a bigger-than-expected 50 basis points on Thursday to 5%, risks causing a recession, something BoE Governor Andrew Bailey said the central bank wants to avoid.

GfK said three measures of consumer sentiment edged up in June compared to the previous month when all five indicators pushed up. Shoppers’ willingness to make expensive purchases fell while its gauge of savings intentions rose.

GfK surveyed 2,000 people between June 1 and June 14.

(Reporting by Suban Abdulla; editing by David Milliken)

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