PoundSterlingLIVE - The UK consumer hasn't been this confident in 20 months according to the latest GfK consumer confidence survey which surprisingly improved by 5 points to read at -21 in September.
This was the highest reading since January 2022, albeit still below its historical average.
The improvement nevertheless matters for the UK economic outlook given the UK's is primarily a consumer-driven economy.
GfK says improvement comes amidst a backdrop of falling core inflation, higher interest rates and rising average weekly earnings, although challenges still remain.
"We think the outlook for consumer spending remains weak amid much tighter credit conditions, a deteriorating labour market, and a depleted savings buffer," says Joe Staton, Client Strategy Director GfK.
Staton says the survey shows individuals are confident their personal financial situation for the coming year will improve, as the Personal Financial Situation for the next 12 months measure is heading back towards positive territory, a metric that is key to indicating the future financial position of households.
"This renewed optimism can also be seen in the similar turnaround for our view on the general economic outlook for the next 12 months, and the eight-point advance in major purchase intentions is potentially better news for retailers as we move into autumn," he adds.
The GfK news is posted on the same morning the ONS reported retail sales recovered in August.
"While the financial pulse of the nation is still weak, these signs of optimism are welcome during this challenging time for consumers across the UK," says Staton.
Gabriella Dickens, Senior UK Economist at Pantheon Macroeconomics says the consumer outlook will likely improve over the rest of the year, supported by further growth in real wages, as the pace of price rises continues to slow.
Pantheon's calculations show mortgage refinancing looks set to subtract about 0.2 percentage points from quarter-on-quarter growth in households' disposable income in Q3 and Q4, which is an unhelpful but not decisive headwind.
"On balance, then, real household disposable incomes should be around 2.0% higher in Q4 than a year ago," says Dickens.
An original version of this article can be viewed at Pound Sterling Live