UK consumer morale is up

Published May 31, 2013


London - British consumer sentiment hit a six-month high in May, and a leading business association revised up its growth forecasts for the first time since the financial crisis, adding to hopes that a tentative recovery is under way.

Soft data from retailers and manufacturers in the past two weeks had suggested that growth in the second quarter of 2013 might be weaker than initially thought.

But Friday's survey from polling company GfK offered cautious grounds for optimism, with consumer sentiment at its strongest since November, when it spiked to an 18-month high.

GfK's consumer confidence barometer jumped by five points to a higher-than-forecast -22, as households became less gloomy about the economy and their own finances.

“There are now some real signs that consumers, while hardly confident, are moving out of the feeling of despondency that the country has been mired in for the last year or so,” said Nick Moon, managing director of social research at GfK.

Britain's economy contracted for part of 2012 but grew a stronger than expected 0.3 percent in the first three months of 2013, and purchasing managers' surveys at the start of May pointed to further expansion in the current quarter.

The British Chambers of Commerce - which represents firms employing more than one in five private-sector workers - revised up its quarterly economic forecast on Friday for the first time since Britain entered a recession in 2008.

It now expects growth of 0.9 percent in 2013 and 1.9 percent in 2014, 0.2-0.3 percentage points higher than previously forecast and slightly above the average forecast of economists polled by Reuters earlier this month.

The Bank of England has also revised up its growth forecasts and lowered its inflation outlook for the first time since before the financial crisis.

Both the BCC and GfK warned that the economy remained vulnerable to setbacks.

“Economic growth is still too weak, and the pace of recovery will remain unduly slow for a while yet. We are still a far cry from getting the economy fully back on track,” said BCC director-general John Longworth.

Later on Friday, the Bank of England will release April consumer and business lending data, which is forecast to show a small rise in mortgage approvals, in line with last week's figures from the British Bankers' Association. - Reuters

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