MNI INTERVIEW: Green Shoots For UK Consumer Despite Inflation-Gfk

UK consumer confidence bounced significantly in April, offering tentative signs of “green shoots”, although it still sits deep in negative territory, the head of a closely watched survey told MNI.

GfK’s long-running Consumer Confidence Index increased six points to -30 in April, data released Friday showed, with all index sub-components higher in comparison to March.

"Consumers' brighter outlook for the economy as energy prices stabilise could even be seen as the proverbial green shoots of recovery, with April’s six-point rise cementing a near-20-point improvement in confidence since the autumn lows," Joe Staton, Client Strategy Director GfK, said.

TURNING TIDE

April's pick-up was the third improvement in overall confidence in a row, Staton noted, adding that it was now fair to consider whether the tide was turning for the consumer.

"Food and energy prices continue to rise, and inflation eats into wages, the cost-of-living crisis is a painful day-to-day reality for many. But are all consumers buckling under the pressure? On the evidence of April’s confidence figures, the answer is clearly no," Staton said.

"Instead, we see a burst of optimism, with big improvements in sentiment across the board."

The outlook for consumers' personal financial situation is a metric Staton follows closely as an indicator of underlying sentiment, and it improvement sharply. While it is positive for consumers to report an improvement in the overall outlook, "only if we see a better outlook for themselves will they open their pocketbooks," he said.

"The eight-point jump (in the personal finance outlook) seen in April is a dramatic change, perhaps suggesting household finances are stronger than we thought," he noted.

BUYERS BACK

The Major Purchase Index, at -28, is higher than it has been since the Ukraine war started, he noted, calling it "a boost to retailers as we head into summer."

Staton was unclear as to why consumers were suddenly upbeat about their own financial outlook.

"The fundamentals haven't changed; inflation is high, real incomes are still falling, the squeeze on household budgets remains and they have at least one more rate hike from the Bank of England to look forward to. However, unemployment has remained stable and people are still in jobs. Perhaps the stoic consumer just thinks perhaps the worst is behind us". (MNI BRIEF: BOE Rate Hike In Focus On Upside Inflation Surprise)