A small lift in consumer confidence over October has failed to take a leading index into positive territory amid fears that the upcoming Budget could damage personal finances.
Labour has made boosting living standards a central mission in government while Chancellor Rachel Reeves has recently talked up plans to lower the cost of living for Brits.
But a renewed focus from the government on boosting the UK economy has yet to materially raise spirits about people’s personal finances and feelings on spending powers.
GfK’s leading consumer survey showed a meagre two point increase on the overall index score to -17, while the major purchase index, which tracks people’s interests in buying more expensive items, improved slightly from -16 in September to -12 in October.
Analysts at the Germany-based research firm put the rise down to seasonal trends on discount offers and anticipation of Black Friday next month as well as Christmas shopping.
“This uptick is partly driven by major retailer sales events held earlier in the month,” said Neil Bellamy, consumer insights director at GfK.
“After several years of high inflation, savvy consumers have adapted their purchasing strategies to make the most of their money when discounts are most attractive.
“Where possible, many now delay major purchases until one of these sales events — and the biggest of all is Black Friday, on 28 November.”
Bellamy added that the Chancellor’s Budget could upend a rise in consumer sentiment given fears that expected tax hikes could hit households across the country.
Consumer confidence hinges on Bank of England decision
GfK’s monthly survey, which is widely used in the Treasury and the Bank of England to help measure demand in the UK economy, has been in negative territory throughout Labour’s first year in government.
The only two measures to be in positive territory are the savings index and people’s expectations about their personal finances in the next 12 months.
The savings index jumped seven points on the month to a score of 29, with more analysts suggesting that interest rates will be held at four per cent over the next few months.
The Bank of England is widely expected to vote against a cut to interest rates at next month’s meeting as officials hold back from pre-empting the effects Reeves’ Budget will have on prices.
City analysts have said a lower reading on inflation than expected may prompt the Bank to cut interest rates at a sooner time than markets had priced in but a cautious approach may prevent rate-setters from making a rash decision.
“It’s unclear whether the Bank of England will look to cut at their next meeting or wait to see what comes out of the Budget before cutting further,” Hal Cook, senior investment analyst at Hargreaves Lansdown, said.
“Remember that they have already cut rates three times in 2025, taking them from 4.75 per cent at the start of the year to four per cent today. While a cut in November is more likely after this latest inflation data, it’s by no means guaranteed.”