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The UK's most important measure of consumer confidence beat expectations in December; however, it is too soon to call this a recovery as some think conditions will get worse.
The headline GfK consumer confidence survey inched up to -17 in December, from -18 in November and beat a consensus estimate for a fall to -18.
"Consumers’ confidence eked out some mild improvements in December," says Elliott Jordan-Doak, Senior U.K. Economist at Pantheon Macroeconomics, adding that the muted clawback comes in the face of "a beating drum of downbeat business sentiment that warns of tax-induced job cuts, rising CPI inflation, and the threat of a global trade war."
Image courtesy of Pantheon Macroeconomics.
The main drag on confidence has been the new government's intense negative messaging about the state of the country's finances, which prompted it to implement significant tax increases on jobs in the October budget.
This has prompted businesses to warn of job cuts in the coming months, which will, in turn, prompt consumers to be cautious.
"Unfortunately, I suspect things will get worse before they get better as businesses and households alike adjust to these challenging conditions. It's brutal out there," says Mark Posniak, Managing Director for Short Term Finance at Maslow Capital.
"As we head further into the festive season, and consumer confidence remains in the doldrums, many businesses are continuing the process of updating their business plans for the coming year to accommodate significant increases in employment costs," says Anna Leach, Chief Economist at the Institute of Directors.
The GfK consumer confidence measure has fallen eight points in two months as downbeat messages from the Government stoked fears of large tax rises for households, while Ofgem’s increase to the energy price cap lifted utility bills for consumers.
Ahead of the elections, consumer confidence was running at multi-month highs.
"The tough times we're in have been confirmed by the data and things are unlikely to get better anytime soon," says Rakesh Dua, CEO at DUA Accountancy & Business Consultancy.
"The grim ripple effect of the Budget has yet to feed through and will grip firms throughout most of 2025. The mood music in the business community is not good at all and many firms are fearful of growth actually happening," he adds.
Colin Low, Managing Director at Kingsfleet, says there's little doubt that the Government’s persistent negativity about their 'inheritance' has further undermined the low levels of confidence that existed at the time of the election.
"Economies need confidence to encourage investment, spending and growth and the Government does need to change the relationship with business and the mood music in order to alter the mentality of the nation’s decision-makers," says Low.
Consumers’ confidence in the economic outlook over the next 12 months was also unchanged at -26, and consumers’ confidence in the outlook for their personal finances over the coming 12 months rose by two points to +1.
"All told, we think the GfK survey paints a picture of gradually recovering consumer confidence in December," says Pantheon's Jordan-Doak. "We expect that the improvement in sentiment will continue into the new year as the distance between the Budget grows."
An original version of this article can be viewed at Pound Sterling Live