Households less pessimistic about personal finances
An index of year-ahead household finance expectations published by S&P Global, a research firm, on Monday edged up to 43.6 in July from 43.5 the previous month. That was the highest level this year, although it was below the 50-point mark, which indicates consumers are pessimistic rather than optimistic.
The improving confidence picture came despite consumers grappling with a renewed acceleration in prices. Inflation rose to 3.6 per cent in June, the steepest rate in 18 months, from 3.4 per cent in the previous month. Wage growth in the private sector also decreased to 4.9 per cent, the weakest level since 2022.
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S&P Global's overall consumer confidence index inched up to 45.1 in July from 45 in the previous period, a two-month high.
Maryam Baluch, an economist at S&P Global Market Intelligence, said: 'July marked another month of pessimism among UK households, with the current financial situation deteriorating further. That said, there was an easing of concerns regarding the year ahead.
'The labour market also offered some reassurance, with job security returning and work activity increasing at a sharper pace. However, the growth rate of income from employment slowed to a four-month low.'
Consumers are still grappling with higher prices at the shops
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Although the UK economy has grown at an underwhelming pace for the past two years, the labour market has remained strong. Unemployment is up to 4.7 per cent but is low by recent historical standards.
The S&P Global labour market sentiment index increased to 52.4 from 52, the only sub-index with a reading above the 50-point mark. The spending index remained well below that threshold in July at 37.7, reflecting official data from the Office for National Statistics that showed depressed retail sales in the first half of the year.
Economists tend to focus more on the GfK consumer confidence index rather than surveys provided by other private sector firms as it has been running since the 1970s. The latest instalment of the GfK index rose to -18 in June, the highest level since December.
• UK households face cost of living squeeze as disposable income falls
Consumer confidence is monitored closely by experts as it provides an indication of whether households will raise or cut their future spending.
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