Consumer confidence has reached its highest point this year – driven by the Bank of England’s interest rate cuts.
The long-running GfK Consumer Confidence Index shows an improvement in how Britons have felt about their personal finances over the past 12 months, as well as in the year ahead.
August’s overall index score rose by two points to -17. This is the best reading since December, but shows consumers remain cautious in the current economic climate.
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GfK’s consumer insights director Neil Bellamy said the improving figures come after the cost of borrowing fell to its lowest level in two years.
He added: “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.”
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Mr Bellamy went on to warn that many British consumers remain in “wait-and-see mode”, meaning any surprise economic changes could result in a sudden shift in sentiment.
In other developments, a recent survey by the British Retail Consortium suggests 42% of shoppers now expect to spend more on groceries in the next three months.
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Some of the country’s biggest retailers have also written to Chancellor Rachel Reeves – warning further tax rises in the budget could affect living standards.
Executives from John Lewis, Tesco, Sainsbury’s, Aldi and Lidl were among the signatories, with Ms Reeves told the recent hike to employer’s national insurance has had a huge impact.
“As retailers, we have done everything we can to shield our customers from the worst inflationary pressures but as they persist, it is becoming more and more challenging for us to absorb the cost pressures we face,” the letter said.
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In response, a Treasury spokesperson said the government is “pro-business”, with 380,000 jobs created since Sir Keir Starmer entered Downing Street.
“The tax decisions we took at the budget last year mean that we have been able to deliver on the priorities of the British people, from investing in the NHS to cutting waiting lists and giving a wage boost for millions as we deliver on the plan for change,” they added.
