Consumer confidence in surprise rebound from historic lows

Consumer confidence has made a surprise rebound from historic lows despite ongoing cost-of-living woes, according to new data.

GfK’s long-running consumer confidence index rose by a significant seven points in February, although the headline score remains at a “severely depressed” negative 38.

Confidence in the general economic situation over the next 12 months is up by 11 points but remains at negative 43 and on a par with last February. Confidence in personal finances looking ahead to the next 12 months increased by nine points to negative 18, which is four points lower than this time last year.

The major purchase index, an indicator of confidence in buying big ticket items, is up three points to negative 37 – 22 points lower than a year ago. The overall uptick follows the index falling three points to a near-historic low of negative 45 in January amid inflation woes and growing concern about another jump in energy bills.

Joe Staton, client strategy director at GfK, said: “Despite widely reported headwinds of inflation continuing to outstrip wage rises, and the ongoing household challenge from the cost-of-living crisis, consumers have suddenly shown more optimism about the state of their personal finances and the general economic situation, especially for the coming year.

“While it’s too early to talk about ‘green shoots of recovery’, the uptick across all measures should be welcomed.”

He added: “The headline consumer confidence score is still severely depressed and the mood as well as the economy remains a long way off pre-lockdown levels, but a little consumer resilience might be what we need to soften any downturn in 2023.”

Linda Ellett, UK Head of Retail and Leisure Consumer Markets for KPMG, said: “Household budgets are squeezed by higher prices, with energy, broadband and mobile phone costs set to rise for many households in April. Despite the uptick in consumer confidence, levels remain low overall.

“With no end in sight to this higher cost landscape, many consumers continue to take steps to reduce spend where they can, switching where they shop, what they buy, whilst also cutting back on some activities, such as eating out and takeaways.

“Despite those steps, nearly half of consumers surveyed by KPMG say they are using savings to help meet their higher essential costs, whilst one in 10 are using credit more.”