The planned reopening of the economy, the Budget’s renewed support for workers and businesses, and the rapid vaccine rollout have boosted UK consumer confidence to the highest level since before the first lockdown last March, fuelling hopes of a spending rebound.
The UK consumer confidence index, a closely watched measure of how people view the state of their personal finances and wider economic prospects, rose seven points to minus 16 in March, according to research company GfK.
The reading, based on data collected between March 1 and 12, was the largest monthly jump in almost a decade. It was better than the minus 20 forecast by economists polled by Reuters and the highest score since March 2020, when data reflected the pre-lockdown period.
Joe Staton, GfK’s client strategy director, commented on the result: “Spring is in the air on the back of well-received Budget announcements, the successful vaccine rollout and road maps in place for ending lockdown.”
The Budget in early March extended public support for businesses and workers, contributing to improved morale together with falling numbers of Covid-19 infections. However, the data was collected before news emerged this week of possible delays in vaccinations as the UK faces a significant reduction in vaccine supplies.
The increase in sentiment is “highly likely” to continue over the next six months, said Staton. “If this improved mood translates into spending, it might help reverse some of the economic damage the UK has suffered.”
Expectations for the general economic situation rose the most as the economy is expected to rebound from the largest downturn in 300 years when it reopens.
However, the assessment of consumers’ past and future personal financial situation also brightened considerably and the proportion of people saying this was a good time to make major purchases rose markedly.
Economists closely monitor the measures of confidence in personal financial conditions because they are seen as a good guide to spending intentions, which is an important factor for the pace of the recovery.
Howard Archer, chief economic adviser at the EY Item Club, said the size of the increase in major purchases intentions “bodes well” for spending.
“The strong rise in consumer confidence in March is a positive development that fuels belief that the consumer can play a leading role in robust recovery developing from the second quarter as the economy increasingly opens up,” he added.
Households have accumulated more than £160bn of bank savings, according to separate data from the Bank of England. Economists believe that if consumers are confident about their personal finances they might spend a larger proportion of those savings on goods and services, providing a strong stimulus to the expected economic recovery.
Experimental debit and credit card transaction data published by the Office for National Statistics showed that despite continuing restrictions, spending has increased to minus 20 per cent of its February 2020 average in the week to March 11, up from minus 28 per cent in the same week the previous year. All sectors of spending, from food to recreational expenditure, showed an upward trend.
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