What's happened
UK consumer confidence has improved to a two-year high, led by expectations of better personal finances and economy, but economists warn that inflation and energy costs could erode gains. Separate data show rising unsecured lending and a two-year high in consumer sentiment, while mortgage approvals remain subdued and borrowing costs are a concern for households.
What's behind the headline?
Context and Stakes
- The September readings suggest a tentative recovery in consumer sentiment amid easing inflation signals, but the overall mood remains negative. This creates a fragile, uneven recovery path for households and retailers.
- Analysts highlight that energy prices and interest rate expectations are the primary wildcards impacting confidence and spending.
What to Watch
- Any shifts in BoE guidance or policy that could alter borrowing costs will directly affect consumer behavior.
- The government’s upcoming budget will be scrutinized for measures to support households facing higher energy bills and debt service costs.
Implications
- A sustained uplift in confidence could bolster retail activity and growth, but a renewed inflation spike or tighter credit conditions could derail momentum.
How we got here
The data come as separate surveys show consumers adapting to a higher-cost environment. GfK’s consumer confidence barometer rose to -13 in September, the highest since August 2024, driven by optimism about personal finances and the broader economy. At the same time, reports point to rising lending, a robust two-year high in consumer confidence, and a Bank of England/policy outlook that could influence borrowing costs ahead of the autumn budget.
Our analysis
Reuters: September business confidence index and lending; The Guardian: consumer confidence data; CNBC and other coverage on happiness and sentiment metrics; The Mirror and The Guardian on broader consumer sentiment trends.
Go deeper
- Will consumer spending hold if energy prices rise again?
- How might the budget influence borrowing costs for households?
- What are economists saying about the sustainability of the confidence uptick?
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