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UK consumers showing ‘renewed optimism’ over economic outlook

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Confidence among UK consumers is showing “renewed optimism” against a backdrop of falling core inflation, new figures suggest.

GfK’s long-running Consumer Confidence Index improved overall by five points in August, with all measures reversing the drop seen in July. However, it remains firmly in negative territory at minus 25.

There was an increase of three points to minus 30 in confidence in the general economic situation for the next 12 months – 30 points better than last August – against a backdrop of falling core inflation, higher interest rates and rising average weekly earnings, GfK said.

The forecast for personal finances over the coming year increased four points to minus three – 28 points higher than this time last year.

Meanwhile, the major purchase index, a measure of confidence in buying big-ticket items, rose eight points to minus 24, 14 points higher than this month last year.

“Although the headline figure remains strongly negative at minus 25, hopes for our personal financial situation for the coming year are heading back towards positive territory, a metric that is key to indicating the future financial position of households,” Joe Staton, client strategy director at GfK, said.

“This renewed optimism can also be seen in the similar turnaround for our view on the general economic outlook for the next 12 months, and the eight-point advance in major purchase intentions is potentially better news for retailers as we move into autumn.

“However, while the financial pulse of the nation is still weak, these signs of optimism are welcome during this challenging time for consumers across the UK.”

Inflation around the world – in pictures

People queue to buy wheat flour at government-controlled prices in Islamabad. Pakistan’s economy has been hit hard by a political crisis, as well as devastating floods and the global energy crisis, with the rupee plummeting and inflation at decades-high levels. AFP

A market in Rio de Janeiro. Brazil’s inflation ended 2022 with a sharp slowdown from double-digit peaks seen throughout the year. Reuters

A market in Istanbul. Turkey’s inflation at the end of 2022 stood at 64. 27 per cent, the country’s Statistical Institute said, while the independent group of inflation researchers ENAG calculated it at 137. 55 per cent. EPA

A Walmart in New Jersey. According to a poll, US Republicans and Democrats have distinct views of what’s most important for the government to address amid high inflation. More Republicans name gas and food prices, energy and immigration, while Democrats focus on health care, climate change and poverty. AP

A used car sales lot in California. US Federal Reserve officials have indicated it’s possibly too early to declare victory over inflation. AFP

A person walks by a sign showing interest rates at a bank in New York. EPA

A woman walks with purchases past a store in Berlin. In December, consumer price growth across the Euro zone slowed to 9.2 per cent from 10.1 per cent a month earlier, Eurostat data showed last week. AP

Workers sit in front of a banner reading “Stop the Inflation Monster” at the Burchardkai Container Terminal as they go on strike for higher wages at the harbour in Hamburg, Germany. Reuters

Price tags at a market in Nice, France. Reuters

Commuters cross Waterloo Bridge in London. The British Retail Consortium said spending in store chains rose by 6.9 per cent in annual terms in December, but this was a long way off consumer price inflation, which hit 10.7 per cent in November. Reuters

Jobseekers in Johannesburg. South Africa’s governing party wants the central bank’s mandate broadened to shore up the economy and promote employment in addition to its existing task of tackling inflation. Reuters

Social grant recipients stand in a queue outside a post office, as joblessness takes its toll in Meadowlands, South Africa. Reuters

“Consumer price inflation is slowing, but costs remain elevated and will continue to test many household budgets for months to come,” Linda Ellett, UK head of retail and leisure consumer markets for KPMG, said.

“This prolonged pressure has already led nearly 40 per cent of consumers that KPMG surveyed to buy more value produce this year, with the same amount buying more promotional items.

“Plus a third of consumers reported they are shopping at lower-cost retailers or buying lower-cost branded goods.

“These actions have helped some households to manage their budget and will continue to do so, but other consumers still face far more significant price hikes in the likes of mortgage or rent – which are far harder to manage and will inevitably impact consumer spending further.”

Updated: August 24, 2023, 11:01 PM



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