Consumer confidence up in August 

Consumers are more confident this month but are vulnerable to worries about rising inflation and potential tax increases, according to GfK’s latest consumer confidence index.

The index rose to its highest since December at minus 17, up from minus 19 in July, boosted by a three-point improvement in households’ sentiment around their personal finances and likely driven by the interest rate cut by the Bank of England earlier this month.

The measure of the country’s general economic situation over the last 12 months has increased by two points to minus 42, seven points worse than a year ago. The expectations for the next 12 months fell one point to minus 30, 15 points worse than last August.

The recovery in households’ confidence in their own balance sheets to levels last seen in August 2024 suggests that the Bank of England’s efforts to ease borrowing costs are finally feeding through to the real economy, a year after officials started cutting interest rates from 16-year highs. Mortgage costs are also edging lower, in a boost for prospective homebuyers.

Neil Bellamy, Consumer Insights Director at GfK, an NIQ Company, said “The biggest changes in August are in confidence in personal finances, with the scores looking back and ahead a year each up by three points. This is likely due to the Bank of England’s August 7th cut in interest rates, delivering the lowest cost of borrowing for more than two years.

“The improved sentiment on personal finances is welcome, but there are many clouds on the horizon in the form of inflation – the highest since January 2024 – and rising unemployment. There’s no shortage of speculation, too, about what the autumn Budget will bring in terms of tax rises. While August’s Overall Index Score of -17 is the best this year, consumer confidence continues to move in a very narrow band, and there’s no sense that it is about to break out into fresher, more optimistic territory. The UK’s consumers are still in wait-and-see mode, and any surprises could result in sudden and sharp changes in sentiment.”