Consumer confidence has rebounded to its highest level in a year despite the continuing cost-of-living woes, according to a long-running index.
Research group GfK’s consumer confidence index climbed by seven points in February.
However the headline score remained at a “severely depressed” -38, indicating that most respondents reported a decline in confidence.
It is the highest reading since April 2022, after it fell to a near-record low in January.
Confidence in the general economic situation over the next 12 months climbed by 11 points, according to the index, but remains at -43, where it was last February.
Confidence in personal finances looking ahead to the next 12 months increased by nine points to -18, four points lower than this time last year.
The major purchase index, an indicator of confidence in buying big ticket items, rose three points to -37, some 22 points lower than a year ago.
Joe Staton, client strategy director at GfK, said: “Despite widely reported headwinds of inflation continuing to outstrip wage rises, and the ongoing household challenge from the cost-of-living crisis, consumers have suddenly shown more optimism about the state of their personal finances and the general economic situation, especially for the coming year.
“While it’s too early to talk about ‘green shoots of recovery’, the uptick across all measures should be welcomed.”
He said the headline consumer confidence score is still severely depressed and the mood as well as the economy remains a long way off pre-lockdown levels, “but a little consumer resilience might be what we need to soften any downturn in 2023.”
Linda Ellett, UK head of retail and leisure consumer markets for KPMG, said: “Household budgets are squeezed by higher prices, with energy, broadband and mobile phone costs set to rise for many households in April. Despite the uptick in consumer confidence, levels remain low overall.”
She said that many consumers are continuing to try to cut spending where they can, switching where they shop, what they buy, while also cutting back on some activities, such as eating out and takeaways.
But people are still needing to dip into their savings, she said: “Despite those steps, nearly half of consumers surveyed by KPMG say they are using savings to help meet their higher essential costs, while one in 10 are using credit more.”
