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U.K. Consumers and Businesses Start 2018 With Confidence Boost

  • GfK household sentiment rises for first time in four months
  • Lloyds business barometer advances to highest since April

U.K. consumers and businesses have started 2018 with cautious optimism.

GfK’s household confidence index rose for the first time in four months in January, with improvements in how consumers view the economy, their personal finances and willingness to spend big. Expectations for an easing of inflation may be helping, though wage growth remains sluggish.

The sentiment index is still below its level before the Brexit referendum in June 2016, and GfK said the increase “could be a temporary blip rather than a strong sign of recovery.” Uncertainty means “more turbulence in the consumer mood this year,” said Joe Staton, head of market dynamics at GfK.

Inflation was at 3 percent in December, close to the fastest in almost six years. Wage growth has failed to keep pace with the acceleration, fueled by the pound’s drop in 2016. It may ease this year, and sterling’s recent appreciation could help.

A separate report from Lloyds showed that business confidence increased to a nine-month high in January. The improvement was driven by economic optimism, though it remains below its pre-Brexit-vote average.

Following the agreement on the first stage of negotiations to leave the European Union late last year, companies are now slightly more positive than negative about the impact that Britain’s exit from the bloc will have on them, Lloyds said. 31 percent of firms said that it’s likely to have a positive impact on economic activity, up from 16 percent in the final quarter of last year.

A more pessimistic view emerges in a survey by the Recruitment and Employment Confederation. It said a growing proportion of firms felt that economic conditions were deteriorating and confidence in hiring and investment declined to a record low.

“Political uncertainty is a serious problem for British businesses,” REC chief executive Kevin Green said. “The government’s inability to conclude Brexit negotiations is having an impact on decision making.”

— With assistance by Mark Evans

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