Consumer confidence reached a two-year high in January as people became more optimistic about the future following the recent trend towards lower inflation.
GfK’s Consumer Confidence Index increased three points to -19 last month, with all five measures up in comparison to December’s reading.
Economists expect the recent cut in national insurance, falling mortgage rates and rising real wages to help consumer sentiment in the months ahead despite the cost of living crisis still hurting many households.
Joe Staton, Client Strategy Director at GfK, commented, “Importantly, the view on our personal financial situation for the coming year has gained two points and now stands at zero. This is exciting as it ends 24 consecutive months of negative scores for this measure and this significant change is the best single indicator for how the nation’s households feel about their income and expenditure.
“Despite the cost-of-living crisis still impacting many households across the UK, consumers appear to be encouraged by the positive news about falling inflation. On balance, while there is national and global turmoil, the Consumer Confidence Index has started 2024 on a positive note – let’s see if this optimism continues.”
There was a slight uptick in inflation in December, and the impact on supply chains from the attacks on shipping in the Red Sea has raised fears of renewed price pressures.
The Bank of England committee is expected to leave interest rates unchanged at 5.25 per cent when it next meets on Feb 1. However, the City is betting that the rate will fall towards 4 per cent by the end of the year, with the first cut in June.
