GfK’s closely-watched consumer confidence barometer has climbed to its highest level since August 2024, delivering an unexpected boost ahead of the upcoming Budget.
The index rose to -13 in September, gaining approximately one point since the previous month and marking the third consecutive month of growth for the first time since summer 2024.
The result is considered a significant surprise given rising inflation and the Prime Minister’s own warning that next month’s Budget will be “challenging” for the country.
Despite remaining in negative territory overall, the consecutive monthly gains represent the strongest run of improvement that GfK has recorded in well over a year.
The primary driver behind September’s uplift was Britons’ improved perceptions of the broader economy over the past year, with that measure easing by four points to -36.
Households also reported improved attitudes toward their personal financial situations over the past year, easing by three points to -3, while their outlook for the coming year improved by one point to a reading of five.
The September reading is being viewed as the strongest signal yet that businesses experienced a so-called “Burnham bounce” over the summer, helped by record temperatures and the FIFA World Cup.
However, Neil Bellamy, GfK’s consumer insights director, cautioned that the rebound may already be losing momentum as inflationary pressures begin to reassert themselves.
Bellamy said: “The return of higher inflation removes one of the strongest positives seen in previous months.”
He added: “So, while the headline score continues to improve, confidence is still firmly in negative territory. With inflation, energy and fuel prices rising, could we soon see consumer sentiment falter?”
Inflation rose from 2.9 to 3.1 per cent in August, driven by sharp increases in petrol and diesel prices along with higher air fares, which outweighed steady food inflation figures.
Energy prices are showing no meaningful signs of falling, prompting Bank of England deputy governor Clare Lombardelli to warn that monetary policy may need to be tightened if energy costs remain elevated.
Speaking at a conference in Warsaw, Lombardelli said higher energy prices make it “increasingly likely” that interest rates will need to rise.
The Bank of England left rates unchanged at its most recent meeting, while both the US Federal Reserve and the European Central Bank chose to hike rates.