U.K. Consumer Confidence Rises to Four-Year HighFergal O’Brien
U.K. consumer confidence rose to the highest in almost four years this month as the strengthening economy made Britons more inclined to spend than at any time since 2010.
A consumer sentiment index by GfK NOP Ltd. rose 3 points to minus 13, the highest since October 2009, the London-based group said in a report published today. A gauge based on whether consumers think now is the right time to make major purchases climbed 5 points to minus 16, the highest since December 2010.
Economic growth accelerated to 0.7 percent in the three months through June and manufacturing and services indexes have strengthened this quarter. The British Chambers of Commerce raised its forecasts today and said gross domestic product will increase 1.3 percent this year, up from 0.9 percent previously.
“The recovery is not yet secure,” said BCC Director General John Longworth. “We have had false dawns in recent years and although this upturn appears to be on stronger ground, we must be aware that complacency could lead to setbacks.”
GfK’s index of households’ outlook for the economy jumped 8 points to minus 1, the highest since April 2010. The measure of people’s assessment of their financial situation over the next year was unchanged in August at zero.
In its report, the BCC raised its 2014 GDP growth projection to 2.2 percent from 1.9 percent, and upgraded its 2015 forecast to 2.5 percent from 2.4 percent. Services outperform other sectors, expanding 1.9 percent this year and 2.6 percent in 2014.
The group said the U.K. is “still facing difficult circumstances” and that reducing the budget deficit is “proving a longer and more painful task than we first thought.” Additional cuts in current spending plans will be needed until 2019 at the earliest, it warned.
Bank of England Governor Mark Carney said on Aug. 28 that Britain’s recovery looks set to continue, though growth prospects “are solid not stellar.” He introduced forward guidance this month under which the BOE plans to keep its benchmark interest rate at a record-low 0.5 percent at least until unemployment falls to 7 percent.
While the BOE doesn’t see the jobless rate reaching the threshold until the end of 2016, the BCC forecasts it will happen in the fourth quarter of 2015.