Consumer confidence in the U.K. unexpectedly improved in August, nearly reversing July’s drop, a signal that pressures on household spending may be easing as inflation ticks down, according to a survey published Friday.
Confidence among consumers rose five points to minus 25 this month, from minus 30 in July, according to an index compiled by consumer-research firm GfK. The result was better than a consensus of economists polled by the Wall Street Journal, which expected the level to remain at minus 30.
Against a backdrop of falling inflation, higher interest rates and rising weekly earnings, consumer confidence has regained momentum this month, said Joe Staton, Client Strategy Director at GfK.
Headline inflation eased to 6.8% in July from 7.9% in June, while core inflation, which excludes volatile food and energy prices, remained flat. Meanwhile, average weekly earnings overtook the inflation rate in the three months to June, rising 7.8% on year.
All five components measured in the survey–including respondents’ feelings about their personal financial situation and the wider economy for the next 12 months–were higher than in July.
The higher headline reading snaps a one-month dip in the indicator, returning to a trend of improving confidence that has steadily risen from record lows last year–the index came in at minus 24 in June.
And although the index remains negative, the outlook for consumers’ personal financial situation for the coming year is heading toward positive territory, key to indicating the future financial position of households, Staton said.
“While the financial pulse of the nation is still weak, these signs of optimism are welcome during this challenging time for consumers across the U.K.,” he added.