UK consumer confidence picks up in October

21st Oct 2024 11:54

(Sharecast News) - UK consumer confidence improved in October, according to fresh survey data released on Monday, with the S&P Global UK consumer sentiment index rising to 47.3, from 46.0 in September.

That marked the second-highest reading in over three years.

Despite remaining below the neutral 50 mark, the index moved closer to its July peak, reflecting a recovery in household optimism following post-election gains.

Households reported a more positive outlook on their finances, with confidence buoyed by strong wage growth and easing inflation.

"Consumer confidence is showing signs of reviving again after being hit by gloomy talk surrounding the Budget, which pulled sentiment off the recent post-election high seen in July," said Maryam Baluch, economist at S&P Global Market Intelligence.

"Confidence is being supported first and foremost by the strong labour market, with the survey showing both job security and income from employment improving at some of the fastest rates seen since data were first collected in 2009.

"An easing of inflation worries, combined with expectations of a further lowering of interest rates, has also helped allay worries over the cost of living."

September's CPI data revealed inflation at 1.7%, below the Bank of England's 2% target, which S&P said helped alleviate financial pressures.

S&P said that trend contributed to a reduction in the strain on current household finances, with October marking one of the least pronounced deteriorations in over three years.

Labour market conditions also remained robust, with job security improving for the eighth consecutive month.

Workplace activity continued to grow, suggesting sustained GDP growth into the final quarter of 2024.

The strength of the labour market remained a key factor in maintaining consumer confidence, with survey data showing improved employment and income prospects.

However, households were still facing challenges with everyday spending, although financial pressures had eased slightly due to inflation moderation and income growth.

S&P said consumer appetite for major purchases, such as cars or large appliances, was the second highest in over three years, pointing to growing confidence in spending decisions.

Savings rates continued to decline, albeit at a slower pace, as the higher cost of living and interest rates took their toll.

Nonetheless, household savings were bolstered by rising incomes, reducing the overall impact of financial strain.

Looking ahead, S&P said household expectations for lower interest rates had moderated since August, as the Bank of England aimed to maintain restrictive monetary policy to ensure inflation stability.

"Households remain cautious in their spending, and report a further fall in savings to underscore how - despite both now heading lower - inflation and interest rates continue to squeeze household finances," Maryam Baluch added.

"However, attitudes towards making major purchases, such as cars or large domestic appliances, which is a good indicator of overall consumer spending, is running at one of the highest levels seen over the past three years, in a further sign of better things to come."

Reporting by Josh White for Sharecast.com.