Business World

Wednesday 1 October 2014

Confidence surges as British consumers loosen purse strings

Fergal O'Brien

Published 31/08/2013 | 05:00

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Recovery: Mark Carney, governor of the Bank of England

UK consumer confidence rose to the highest in almost four years this month as the strengthening economy made Britons more inclined to spend than at any time since 2010.

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A consumer sentiment index by GfK NOP rose three points to minus 13, the highest since October 2009, the London-based group said in a report published yesterday.

A gauge based on whether consumers think now is the right time to make major purchases climbed five points to minus 16, the highest since December 2010.

Economic growth accelerated to 0.7pc in the three months through June and manufacturing and services indexes have strengthened this quarter.

The British Chambers of Commerce (BCC) raised its forecasts and said gross domestic product would increase 1.3pc this year, up from 0.9pc previously.

"The recovery is not yet secure," said BCC director general John Longworth. "We have had false dawns in recent years and although this upturn appears to be on stronger ground, we must be aware that complacency could lead to setbacks."

GfK's index of households' outlook for the economy jumped eight points to minus one, the highest since April 2010. The measure of people's assessment of their financial situation over the next year was unchanged in August at zero.

In its report, the BCC raised its 2014 GDP growth projection to 2.2pc from 1.9pc, and upgraded its 2015 forecast to 2.5pc from 2.4pc. Services outperformed other sectors, expanding 1.9pc this year and 2.6pc in 2014.

PAINFUL

The group said the UK was "still facing difficult circumstances" and that reducing the budget deficit was "proving a longer and more painful task than we first thought".

Additional cuts in current spending plans would be needed until 2019 at the earliest, it warned.

Bank of England (BOE) governor Mark Carney (pictured) said on Wednesday that Britain's recovery looked set to continue, though growth prospects "are solid not stellar".

He introduced forward guidance this month under which the BOE plans to keep its benchmark interest rate at a record low 0.5pc at least until unemployment falls to 7pc.

While the BOE doesn't see the jobless rate reaching the threshold until the end of 2016, the BCC forecasts it will happen in the fourth quarter of 2015. (Bloomberg)

Irish Independent

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