Consumer confidence has edged higher as shoppers prepare for a pre-Christmas spending spree despite soaring inflation and the prospect of an interest rate rise, a closely watched survey suggests.
GfK’s consumer confidence index has risen by three points to -14 this month, reversing a three-month losing downward streak.
The survey’s major purchase index — a gauge of appetite for big-ticket items — has risen by seven points and is now twenty-five points higher than it was at this time last year. The reading will be a fillip to retailers before next week’s Black Friday shopping event and the Christmas and new year period.
Consumers’ view of the general economic situation over the past year and for the 12 months ahead also has improved, by six points and three points, respectively.
GfK’s relatively upbeat findings indicate that many workers appear to have shrugged their shoulders at the sharply rising cost of household energy bills, petrol and diesel, second-hand cars, food and a slew of other products and services.
Data from the Office for National Statistics this week showed that the consumer prices index had climbed to 4.2 per cent in October, the highest reading for a decade.
Expectations are mounting that the Bank of England’s monetary policy committee will raise rates from their record low of 0.1 per cent next month. Andrew Bailey, the Bank’s governor, recently said that he was “very uneasy” about the inflation outlook and that the decision to keep rates on hold a fortnight ago had been a close call.
A buoyant labour market is pushing up general price levels, but also is putting more money in workers’ pockets. Job vacancies have risen to a record 1.17 million, up 388,000 from the pre-pandemic level. The unemployment rate fell by half a percentage point to 4.3 per cent in the past three months, while average weekly earnings jumped by 5.8 per cent year-on-year.
Joe Staton, client strategy director at GfK, said: “Headline consumer sentiment ticked upwards this month despite decade-high inflation, fears of higher prices and worries over rising interest rates, and as the deepening cost-of-living squeeze leaves UK household finances worse off this winter.”
People are less bullish about their financial situation than the broader economy. The GfK gauge measuring attitudes to personal finances dropped by two points to -7, while the forecast for the next 12 months increased by a point to 2.
Staton said: “The view on the general economic situation over the past year and year to come is better, but consumers are less buoyant on their personal finances. This weakness is important, as it reflects day-to-day plans to save or spend and is a strong driver of overall UK economic growth.
“One highlight for both physical and virtual retail is the seven-point jump in major purchase intentions in the run-up to Black Friday and Christmas. Is this a sign that shoppers are ready to bounce back? That’s how it looks, but consumers also know that when the festivities are over it’s going to be a tough year in 2022.”