U.K. consumer confidence rose to the highest in almost six years in September as signs of a sustainable economic recovery spurred consumers to spend.
A consumer sentiment index by GfK NOP Ltd. rose 3 points from August to minus 10, the highest since November 2007, the London-based group said in a report published today. Its gauge based on whether consumers think now is the right time to make major purchases climbed to the highest since 2010.
Economic growth accelerated in second quarter as higher consumer spending offset a decline in business investment, data yesterday showed. Prime Minister David Cameron has pointed to the recent pickup in activity as a sign the government’s policies are working, while the Bank of England is trying to encourage the recovery by saying it won’t raise interest rates too quickly.
“Whether the current economic recovery is real or will prove to be a credit-fueled bubble, this continuing steady growth in confidence looks like good news for the government,” said Nick Moon, Managing Director of Social Research at GfK.
GfK’s index of households’ outlook for the economy jumped 4 points to 3, the highest since February 2010. The measure of people’s assessment of their financial situation over the next year rose to 1 from zero. The gauge for major purchases rose 2 points to minus 14 and is 17 points higher than a year earlier.
While recent economic indicators have signalled a further strengthening this quarter, BOE officials have said it’s not yet time to tighten policy. The central bank has pledged to keep its key rate at a record-low 0.5 percent at least until unemployment falls below 7 percent.
“It would be spectacularly misguided to think that some signs of more normal growth mean that the economy is back to normal,” BOE policy maker David Miles said this week. “It would be equally misguided to think that if growth were to be near trend, monetary policy should be quickly returned to a more normal setting.”
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