UK consumer confidence jumps past forecasts in September, Gfk says

Consumer confidence in the UK recovered sharply in September, picking back up to the levels seen before the referendum vote.

GfK´s gauge of consumer sentiment rose from -7 points in August to -1 in September, versus economists´ forecasts for a reading of -5.

It was last at that level in May and June.

"British consumers appear to have shrugged off Brexit fears about the economy as wages continue to grow faster than prices, rising employment boosts income, and low interest rates encourage people to spend rather than save as seen by improvements in the Major Purchase Index and low levels in the Savings Index.

"But will confidence continue to rise in coming months? Or are we seeing misplaced consumer optimism in which any kind of bad news – economic or political – sends the Index reeling once again?,” said Joe Staton, head of Market Dynamics at GfK.

In particular, a sub-index tracking British households´ confidence regarding the wider economic situation over the next 12 months jumped by 13 points to -9, contributing 2.6 points to the improvement in the headline index.

Another sub-index linked to the outlook for personal finances improved from areading of +4 to +7.

Families in Britain were also more confident as regarded the current economic situation, with that subindex up by 7 points to -16.

"September consumer confidence is likely, in part, riding the waves of the post-referendum policy relief we saw in August (rising political certainty; muscular BoE MPC policy response; and growing expectations of fiscal easing)," Andrzej Szczepaniak and Fabrice Montagne at Barclays Research said in a research report sent to clients.

Nonetheless, given that GfK canvassed people during the first two weeks of each month, then the responses to the August survey were given before the last meeting of the Monetary Policy Committee.

Hence, the improved confidence reflected in the post-MPC responses can be seen as an “artificial increase” due to timing, as any response prior to that event is likely to have been more negative, Barclays said.

"Irrespective of the improvement in sentiment since the referendum, our view is that households will only materially change habits once they are directly impacted, at which point we are likely to see a material fall in confidence levels, in our view."