UK consumer spirits buoyed in January by oil price drop, low unemployment, GfK says

Consumer spirits in the UK were near their best levels ever in January, as the plummeting price of crude oil, very low unemployment and rising house prices more than offset the depressing influence of the retreat in share prices, economists said.

GfK´s consumer confidence gauge from a reading of +2 for December to +4, well ahead of the +1 which analysts had been expecting.

The headline index thus returned to the upper decile (10%) of readings since the survey compiler began publishing it in 1974.

However, whereas consumers now believed it was a better time to carry out "major" purchases and their confidence in their own finances remained at its highest since 2007, most families still expected the economy to continue deteriorating, GfK said.

A gauge of economic expectations improved only marginally, from -6 in December to -5 in January.

In that same vein, Samuel Tombs, chief UK economist at Pantheon Macroeconomics told clients that: "The optimism of consumers contrasts starkly with increased corporate pessimism. The Economic Sentiment Indicator for the U.K. produced by the E.C., which covers business and consumers, fell in January to its lowest level since March 2013 and is now slightly below the E.U. average.

"With the government retrenching, exports uncompetitive and investment potentially subdued in the run-up to the E.U. referendum, continued momentum in consumer spending won’t prevent a further slowdown this year."