Unlock Editor Digest for free.
Rola Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
Britain’s consumer confidence is recovering after falling ahead of the budget, according to data released on Friday, with economists attributing the turnaround to low interest rates, rising wages and less concern over tax hikes. has declared
The GfK Consumer Confidence Index – a measure of how people view their personal finances and broader economic prospects – rose three points to minus 18 in November, data released on Friday showed.
It follows an eight-point drop between September and October as consumers grew nervous over the “painful” choice Chancellor Rachel Reeves said she would be forced to announce in the Budget on October 30.
Analysts suggested the absence of some drastic tax-raising measures in Reeves’ statement helped restore confidence. That would reassure consumers, said Sandra Horsfield, an economist at wealth management group Investec.
The Chancellor massively increased spending, taxation and borrowing. However, the expected expansion of the income tax threshold, which would have pushed millions of workers into higher tax bands, was not announced.
The Budget did not change exemptions for pension contributions but increased employers’ National Insurance payments.
Some content could not be loaded. Check your internet connection or browser settings.
Horsfield said the 6.7% rise in national wages since April, with big increases for younger workers, “may have cheered some workers, as did news of further interest rate cuts from the Bank of England last week.” “, said Horsfield.
The BoE cut interest rates for the second time this year in November to 4.75%, helping to bring mortgage rates down from their peak in the summer of 2023.
Wages have also continued to rise above inflation, helping consumers recoup some of the damage caused by rapid price increases over the past three years.
Neil Bellamy, director of consumer insights at GfK, said: “There has been evidence of panic in recent months as consumers consider the potentially disruptive impact of the budget at home and even the implications of the US presidential election.
“But we are past these incidents now,” he added.
Bellamy highlighted a big five-point jump in people’s willingness to make big purchases, which could signal higher spending during the Black Friday sales holiday on November 29 and the Christmas period.
Linda Elliott, UK head of consumer, retail and leisure at consultancy KPMG, said early signs were “positive” for Black Friday and Cyber Monday, an annual shopping event focused on online sales.
“Retailers will expect a release in spending demand, including Christmas gifts, as we head into the sector’s golden quarter,” he added.
However, many consumers are still under financial pressure. Inflation rose to a better-than-expected 2.3 percent in October, bolstering expectations that the BoE will not cut interest rates again until 2025.
Meanwhile, despite retreating from their peaks, mortgage rates and rent growth are still historically high.
Bellamy cautioned that it is “too early to expect significant further improvement in consumer sentiment”.
He said inflation had yet to be brought under control, people were still feeling the brunt of life’s pressures, and it would take time for Britain’s new government to deliver on its promise of ‘transformation’.
