UK consumer confidence improved in November despite surging inflation, easing some economists’ concerns about the spending recovery in the run-up to Black Friday and Christmas.
The UK consumer confidence index, a closely watched measure of how people view the state of their personal finances and wider economic prospects, rose 3 points to minus 14 in November, according to research company GfK.
The reading is the average net balance between people who are optimistic and pessimistic in five aspects of the economy.
It is based on data collected between November 1 and 12 and was stronger than a slight fall to minus 18 forecast by economists polled by Reuters. It improves expectations for consumer spending for Black Friday, the American-inspired retail discount tradition that this year falls on November 26, and Christmas.
Joe Staton, client strategy director at GfK, said a seven-point jump on the sub-index tracking whether people thought this was the right time to make big purchases was particularly promising. He noted it could be a sign that “shoppers are ready to bounce back after last year’s cancelled family gatherings, with a Christmas splurge in coming weeks.”
The improvement came despite a sharp increase in inflation over the past few months.
Official data released on Wednesday showed that surging energy prices pushed consumer inflation in October to the highest level in a decade, increasing households’ cost of living and hitting their spending power. The jump in prices also increased the likelihood of the Bank of England raising interest rates at its December meeting.
“We do see as one of the downside risks the possibility that higher inflation, coupled with a higher tax burden and rising interest rates, will see consumer spending moderating over the coming months,” said Yael Selfin, chief economist at advisory firm KPMG UK.
However, people’s views on the general economic situation improved markedly and there was also a small rise in people’s perception of their personal financial situation for the year ahead, possibly reflecting a buoyant jobs market with record-high vacancy rates.
Other non-standard measures of spending have also showed resilience.
In the week to November 14, the value of UK bank transactions rose to 12 per cent above the same week in 2019, the highest reading this year, according to Fable Data, a company that tracks bank transactions.
Avinash Srinivasan, analyst at Fable Data, noted “increasing spend ahead of the holiday season” in clothing stores, with improvements for department stores, health and beauty shops. The rise tallies with a 4 percentage point increase in the Bank of England tracker of credit and debit card purchases over the same period.
The number of seated diners was also well above 2019 levels in the second week of November, while transaction volumes at the sandwich chain Pret A Manger continued their upward trajectory — reflecting more people returning to the office, according to data published on Thursday by the Office for National Statistics.
Consumer perceptions and their likelihood to spend matter because household consumption has been the driver of the UK’s economic rebound from the hit of the pandemic. In the third quarter, it contributed to 1.2 percentage points of the 1.3 per cent economic growth.