Consumer confidence increases but rising inflation looms

The overall index score rose two points to -17 in August. Four measures increased while one was down month on month, according to the GfK consumer confidence survey.

Confidence in personal finances has improved by three points to -4 in the past year, as GfK credits the Bank of England’s cut in interest rates for this. 

This is three points better than August 2024, with the outlook for personal finances over the next 12 months rising three points to +5.

The index measuring the general economic situation increased two points to -42 in the last 12 months. This is seven points worse than the same time last year.

Expectations for this index over the next 12 months decreased one point to -30, 15 points worse than August 2024.

The major purchase index increased two points to -13, unchanged from last year.

GfK consumer insights director Neil Bellamy said: “The biggest changes in August are in confidence in personal finances, with the scores looking back and ahead a year each up by three points. This is likely due to the Bank of England’s August 7th cut in interest rates, delivering the lowest cost of borrowing for more than two years. 

“The improved sentiment on personal finances is welcome, but there are many clouds on the horizon in the form of inflation – the highest since January 2024 – and rising unemployment. There’s no shortage of speculation, too, about what the autumn Budget will bring in terms of tax rises. 

“While August’s Overall Index Score of -17 is the best this year, consumer confidence continues to move in a very narrow band, and there’s no sense that it is about to break out into fresher, more optimistic territory. The UK’s consumers are still in wait-and-see mode, and any surprises could result in sudden and sharp changes in sentiment.”