The GfK consumer confidence index rose to its highest level in two years in September, a surprise uptick that arrives just weeks before a Budget the government has already described as difficult. The reading of -13, up roughly one point from August, marks three consecutive months of growth in the index, the first such run since the summer of 2024.
The improvement hands a modest political fillip to Andy Burnham ahead of the autumn Budget, though the headline figure remains firmly in negative territory. GfK’s measure has not been this strong since August 2024, and even now it signals that British households are more cautious than confident about their finances.
What is driving the GfK consumer confidence index upward
The largest single contributor to September’s improvement was households’ view of the broader economy over the past year, which eased by four points to -36. Perceptions of personal financial situations over the same period also improved, moving three points to -3. Looking ahead, Britons’ outlook for their own finances over the coming year edged up by one point to a reading of five.
GfK’s September reading is described as the clearest evidence yet of what some observers have called a ‘Burnham bounce’ over the summer, aided by record temperatures and the FIFA World Cup. Three months of consecutive gains in a survey as closely watched as this one carry weight, even when each individual monthly move is modest.
Warning that momentum in consumer confidence may not last
Neil Bellamy, GfK’s consumer insights director, struck a cautious note on the back of the figures. ‘The return of higher inflation removes one of the strongest positives seen in previous months,’ he said. ‘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?’
The concern is well-grounded. Inflation climbed from 2.9 per cent to 3.1 per cent in August, driven by sharp rises in petrol and diesel prices and higher air fares, which more than offset steady food inflation. Energy costs are giving no clear sign of falling back, and the combination is starting to weigh on the monetary policy debate.
Clare Lombardelli, deputy governor of the Bank of England, told a conference in Warsaw that higher energy prices make it ‘increasingly likely’ that monetary policy will need to be tightened. The warning came on Thursday, a week after the Bank held interest rates unchanged at its most recent meeting.
That decision to hold stands in contrast with moves elsewhere. The US Federal Reserve and the European Central Bank both opted to raise rates at their latest meetings, adding to the pressure on the Bank of England to follow. Whether it does will depend in part on whether the energy price picture deteriorates further in the months ahead.
For now, the GfK consumer confidence index offers a mildly encouraging read on household sentiment, but the combination of rising inflation, higher fuel costs and the prospect of dearer borrowing means the mood could shift quickly. Bellamy’s caution about faltering sentiment looks less like a hedge and more like a reasonable working assumption for the weeks ahead.
The next GfK reading, covering October, will arrive after the Budget and is likely to be the first real test of whether the political and economic backdrop has tipped confidence back into decline or allowed it to hold.
