U.K. Consumer Confidence Increases on Economic Outlook, GfK Says

U.K. consumer confidence improved this month as Britons became more optimistic about the outlook for the economy and proved more willing to make big purchases, GfK NOP Ltd. said.

A sentiment index rose to minus 26 from minus 29 in December, the London-based research group said in an e-mailed report today. Economists had forecast a gain to minus 28, according to the median of 19 estimates in a Bloomberg News survey. A gauge of consumers’ view of the economy over the next 12 months rose six points to minus 25.

“There’s a definite note of optimism in these findings,” said Nick Moon, managing director of social research at GfK. Still, with people feeling their own finances have worsened, “it is too soon to say if more positive views on the general economy mark the start of sustained rise in the index.”

The improvement in sentiment contrasts with data last week showing the economy shrank 0.3 percent in the fourth quarter, putting it on the brink of a triple-dip recession. Still, some reports may be buoying sentiment, with jobless claims unexpectedly falling in December and U.K. stocks rising to a 4 1/2-year high this month.

GfK interviewed 2,000 people from Jan. 4 to Jan. 13. It said a measure of the climate for making major purchases rose 5 point to minus 22 in January, while a gauge of consumers’ view of the economy over the past 12 months increased 4 points to minus 51, according to the GfK report.

Nevertheless, with inflation at 2.7 percent -- above the Bank of England’s 2 percent target and faster than wage growth - - household incomes are still being squeezed. People’s view of their own financial situation for the next 12 months was unchanged at minus 7, and a measure for the past year declined 2 points to minus 24.

A separate report today from the Engineering Employers Federation showed that the average pay settlement in manufacturing was 2.4 percent in the fourth quarter, unchanged from the three months through November.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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