Confidence among UK consumers has improved but remains fragile in the face of expected petrol price rises amid escalating conflict in the Middle East, according to a leading index.
The latest snapshot from the data company GfK says sentiment improved by two points in June but remained in negative territory at -18, well below the -12 of a year ago. A reading above zero indicates optimism; below indicates pessimism.
The last time the headline index, which is closely watched by the government and the Bank of England, was positive was in January 2016, when it was at 4. It has had double-digit negative readings since September 2021 when Britain was in the grip of Covid-19.
Last month, sentiment hit its lowest level since November 2023 as a combination of domestic tax increases, rising bills and worries over Donald Trump’s trade wars weighed on minds.
Consumers became more optimistic about the overall economy this month, with scores up three points when judging how the past year went, and up by five points when looking at the next 12 months. However, both measures were firmly stuck in negative territory, at -43 and -28 respectively.
Assessments of personal financial situations were unchanged, with the score for the past 12 months at -7 and the measure looking ahead was in positive territory, at 2.
Neil Bellamy, consumer insights director at GfK, said: “Consumers have been resolute in their views on their wallets, with June’s personal financial situation scores (past and future) unchanged from May. Yet confidence is still fragile because the dark shadow of inflation is a day-to-day challenge for so many of us.”
The cost of filling up a car started creeping up this week when crude oil prices rose sharply after Israel’s attack on Iran. A litre of petrol now costs 132.8p while diesel is at 138.9p, according to the AA motoring group.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said: “Looking ahead, consumer confidence will likely be squeezed by gradually easing wage growth while inflation remains at about 3.5% for the rest of the year, and unemployment will likely creep up.
“The prospect of tax increases in the October budget could also weigh on households. But real income should continue eking out gains given that average earnings rose 5.5% year-over-year in March. We also expect unemployment to rise only modestly to a peak of 4.9%.”
after newsletter promotion
Gen Z is driving improvements in confidence, with younger generations the most optimistic about the future, a separate survey from the British Retail Consortium showed on Thursday. Consumer sentiment improved for the second month in a row to the highest level since Christmas but remained in negative territory.
“This rising optimism may also reflect the increase in minimum wage from April, with many younger people expected to have seen a significant uplift in their pay packet,” said Helen Dickinson, the BRC’s chief executive. “Expectations of future spending – both in retail and more generally – rose slightly, with more spending on groceries planned over the coming months.”