UK consumer confidence hits 14-month high but budget fears loom | investingLive

British consumer sentiment rose in October to its joint-highest level since August 2024, driven by shoppers taking advantage of promotional sales events from Amazon and other major retailers.

Market research company GfK reported on Friday that its long-running consumer sentiment gauge rose to -17 in October

• -20 was the expected
• from -19 in September.

The improvement was largely technical, reflecting a four-point increase in the ‘major purchase index’ component. Neil Bellamy, consumer insights director at GfK, said this “uptick is partly driven by major retailer sales events,” adding that after years of high inflation, “savvy consumers have adapted their purchasing strategies to make the most of their money.”

However, the headline confidence figure masked growing anxiety about personal finances. While households’ assessment of the general economic situation improved, their outlook for their own finances over the coming year worsened.

This pessimism is likely tied to high saving rates and the anticipation of further tax hikes from Finance Minister Rachel Reeves at the annual budget on November 26. Economists suggest households are saving more due to the 2022 inflation shock and a deteriorating labour market.

With the budget announcement scheduled just two days before Black Friday, Bellamy noted that retailers will be “watching closely to see whether the Chancellor’s Budget… boosts or dampens spending during that crucial weekend.”

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This GfK report presents a mixed and cautious signal for markets. While the headline rise might offer a superficial boost to retail stocks, investors will likely focus on the deteriorating outlook for personal finances. This underlying pessimism, driven by fears of tax hikes, suggests consumer spending will remain fragile.

This report dampens optimism for a strong retail recovery and will likely keep pressure on GBP, as it reinforces the view that households are bracing for a financial squeeze, which could mute spending even during the crucial upcoming Black Friday period.