Another brighter than expected set of economic numbers out today indicate the UK has a chance of avoiding a much-tipped recession this year.
Consumer confidence climbed faster than forecast to minus 38 points this month, up seven points from minus 45 points in January, according to research firm Growth for Knowledge’s index which has been running since the 1970s.
Despite the shock upturn, confidence is still running at historically low levels after rebounding from the lowest reading ever when Liz Truss took charge of the country in September.
The survey is the latest in a string of data that indicate the UK economy is holding up much better than experts had forecast just a few months ago.
Numbers out earlier this month revealed the country narrowly avoided a recession at the end of last year, while the Office for National Statistics last week said inflation in January fell for the third straight month to 10.1 per cent, a faster descent than analysts had forecast.
That body of evidence has prompted City economists to trim their projections for how much gross domestic product will drop this year.
“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,” Joe Staton, client strategy director at GfK, said.
While inflation is in the early throes of a sustained decline this year that some City experts have predicted will bring it down to the Bank of England’s two per cent by Christmas, wage growth is expected to trail it for most of the year, delivering a record hit to spending power.
Bank governor Andrew Bailey and co’s ten successive interest rate hikes to a 15-year high of four per cent has amplified the squeeze on family budgets.
All of GfK’s measurements that generate the overall consumer confidence index strengthened in February.
Households’ expectations of the UK economy over the next year improved 11 points, the biggest rise of any category, helping to drag their confidence in their personal finances over the same period up nine points.
Analysts cautioned this month’s confidence rise may be a flash in the pan.
“The headline consumer confidence score is still severely depressed and the mood as well as the economy remain a long way off pre-lockdown levels, but a little consumer resilience might be what we need to soften any downturn in 2023. However, many challenges remain and this may be nothing more than a bubble of hope – and bubbles always burst,” Staton added.