Consumer confidence rises as fears over budget ease

Consumer confidence among UK households rose across the board in November, reversing the falls in sentiment recorded before the budget.
A closely watched measure of household confidence rose by three points to -18, according to GfK, which compiles the survey. The climb wipes out the drop in sentiment caused by uncertainty over the tax rises announced in Rachel Reeves’s budget last month.
All five sub-sectors of the household survey rose between October 30 and November 15, with the most optimism recorded in consumers’ intentions to make big purchases before the Black Friday sales period and Christmas.
“There was evidence of nervousness in recent months as consumers contemplated the potentially worrying impact of the UK budget at home, and even the implications of the US presidential election. But we have moved past those events now,” Neil Bellamy, consumer insights director at GfK, said.
Labour has come under fire for its consistent warnings about the “tough choices” to be made at the budget, which was reflected in growing pessimism among households and businesses. But there seems to have been limited fallout, with the most recent growth figures showing strong consumer spending and business investment in the three months to September.
GfK’s survey reported modest improvements in consumer measures of their personal finances and the general economic situation over the next 12 months. The figures clash with a separate survey of 1,500 households which showed growing pessimism over job security, according to S&P Intelligence.
“Consumer confidence continues to be variable but ability to spend depends on household circumstance,” Linda Ellett, UK head of consumer and retail at KPMG, said. “Inflation and interest rates having not yet sufficiently fallen and a toughening labour market are all weighing on the minds of many people.”
The government announced a £20 billion rise in employer national insurance contributions at the budget, as part of its promise not to hit “working people” with extra levies. Labour has also cut back on winter fuel payments for all pensioners, and said it will boost pay for public sector workers this year.
Economists believe consumers will get a helping hand from gradually falling interest rates, which have been reduced from 5.25 per cent to 4.75 per cent since August. More monetary loosening is expected from February next year but rate cuts will be gradual in pace after inflation rose in October to 2.3 per cent and is on course to peak at 3 per cent in 2025.
Bellamy said it was “too early to expect significant further improvements in the consumer mood”.
“As recent data shows, inflation has yet to be tamed, people are still feeling acute cost-of-living pressures, and it will take time for the new government to deliver on its promise of ‘change’.”