Households are feeling more optimistic about the outlook for the economy and their personal finances even though Brexit uncertainty continues to weigh on confidence.
GFK’s consumer confidence index rose from -13 to -10 in May, marking the first change since February. Although consumers are feeling more hopeful, the index remained in negative territory where it has been stuck since the beginning of 2016.
Consumer sentiment is a critical barometer of national output; about two thirds of GDP is tied to household spending. Falling confidence levels tend to dampen demand, which pulls on economic growth.
The GFK index is compiled for the European Commission and is considered a key economic indicator. It is monitored closely by the Bank of England.
Households are feeling less pessimistic across almost all categories, according to the index. A balance of -29 said that Britain’s economic fortunes would improve in the coming year, five points higher than the -34 last month.
People are also more positive about their financial situation. The survey showed a balance of 5 when they were asked about whether their personal finances would worsen or improve over the next year, up from zero.
Joe Staton, from GFK, said: “Despite a backdrop of Brexit-related change and complexity, and price rises for most household bills in April, consumers have managed a seasonal spring in their step with a three-point uptick.”
Signs that consumers are adjusting to the deadlock in Brexit negotiations and responding positively to higher wages and low unemployment levels were also noted by the Centre for Economics and Business Research. Its consumer confidence index was at 105.5 in May, a year-long high. Any score over 100 means more consumers are confident.
Businesses, however, are faring less well. According to Lloyds Banking Group’s monthly business barometer, overall confidence fell for the first time in three months, by four points to a balance of 10 per cent and below the long-term average of 24 per cent.