British consumers are their most confident since January 2022 as lower inflation helped them to feel better about their finances, a survey has revealed.
The results come as welcome news for British Prime Minister Rishi Sunak before a national election expected this year.
The GfK consumer confidence index rose to -19 in January from -22 in December. A Reuters poll of economists had forecast a slightly smaller improvement to -21.
Commenting on the results, the client strategy director at GfK, Joe Staton, said, “Despite the cost-of-living crisis still impacting many households across the UK, consumers appear to be encouraged by the positive news about falling inflation.”
While British inflation unexpectedly rose to 4% in December, it is well below its peak of 11.1% in October 2022.
The December rise dented investors’ hopes for quick interest rate cuts by the Bank of England. The bank is expected to hold its main bank rate at a nearly 16-year high of 5.25% next week.
This follows 14 consecutive increases between December 2021 and August 2023, but analysts expect that the time for rate cuts might be approaching.
GfK said all five of its confidence gauges rose in January. It added that the outlook for personal finances in the next 12 months is out of negative territory for the first time in two years.
"This significant change is the best single indicator for how the nation's households feel about their income and expenditure," Staton said.
A measure of how consumers view the economy over the next 12 months increased by four points to -21.
Official data published last week showed the biggest fall in retail sales for nearly three years in December.