UK consumer confidence edged up in August from 12-month lows the month before, but British business remains pessimistic compared to last year, according to closely watched surveys.
A long-running consumer confidence index moved from a negative reading of 12 in July to 10 in August, according to pollsters GfK.
While an upward trend in confidence would represent a welcome relief for consumer-facing sectors, the reading remains the second-lowest since the aftermath of the EU referendum last year.
Joe Staton, GfK head of market dynamics, said: “These figures must be seen against the backdrop of better news on inflation, public finances, jobs and growth prospects as the UK economy displays some signs of stability after a volatile start to the year.
“However, the index has a lot of ground to regain to get back to black,” he added.
Consumers’ view on the general economic situation improved slightly, but the main driver of the improvement was increasing confidence in personal finances, GfK reported.
Household finances have been squeezed in the past year as inflation has outstripped wage growth, weighing on consumers’ purchasing power. However, the acceleration in inflation moderated in July to 2.6 per cent annually, providing some relief from price rises.
The uncertainty among consumers has had a knock-on effect on British companies, according to a separate survey of UK business.
Overall business confidence fell 13 points in August to a one-year low, according to Lloyds Bank, with a balance of 17 per cent of businesses reporting a positive overall economic outlook.
Meanwhile, the measure of economic optimism fell by 12 points from 17 per cent to five per cent, the lowest level since June 2016 and the second lowest level since 2012.
Consumer services confidence dropped to a 14-month low of three per cent.
Sentiment was “weakest among consumer-facing firms,” said Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking. “While confidence overall is now just under the long-term average, firms’ hiring plans remain robust.”
While consumer spending has remained relatively resilient over the past year, the Bank of England expects it to moderate over the course of the next 12 months, clouding the outlook for the consumer services which have driven recent economic growth.