UK consumer confidence unexpectedly ticks higher - GfK

(Sharecast News) - UK consumer confidence unexpectedly edged higher in May, a long-running survey showed on Friday, although households remained reluctant to splash out on big ticket items.

The latest GfK consumer confidence barometer was -23, still in negative territory but up two points on April. It was also notably better than consensus expectations for a fall to -28.

Within that, expectations for personal finances over the coming 12 months improved by two points to -2, while the measure for hopes about the economy's future performance strengthened five points to -38.

The major purchase index, however, shed two points to -20, its lowest level since January 2025.

The savings index, which is not included in the overall score, was also sharply lower. It tumbled 10 points, which GfK said suggested people were diverting funds out of savings accounts to pay for day-to-day expenses.

Both consumer and business sentiment has taken a major hit since the outbreak of war in the Middle East at the end of February. The conflict has sent global energy prices soaring, reigniting inflation fears and weighing on interest rate expectations. Supply chains are also increasingly being disrupted.

Fears are now growing that the conflict with drag on for several more months, with Washington and Tehran struggling to agree a permanent peace deal.

However, the immediate macroeconomic impact in the UK has been less profound than initially feared. Inflation, while still expected to rise, fell back to 2.8% in April, and with economic growth already sluggish, the Bank of England has so far kept interest rates on hold, although the central bank has confirmed it stands ready to tackle inflation if necessary.

Neil Bellamy, consumer insights director at GfK, said: "Consumers appear to be in a more generous mood in May."

However, he noted that households in lower income brackets remained cautious. He said: "For those earning £14,500 to £24,999, for example, the May score is -33, a 19-point fall. Clearly, for specific groups of consumers, the impact of cost of living pressures is acute.

"Inflation may have fallen in April, but with price pressures expected to rise again and continued uncertainty around interest rates, it is unlikely May marks the beginning of a sustained improvement."

The barometer has been published jointly by GfK and GfK's founder, the Nuremberg Institute for Market Decisions (NIM), since October 2023.