UK consumers turn a little less gloomy in May, GfK survey shows

UK consumer confidence edged up to -20 in May from -23 in April, exceeding economists' expectations, according to GfK's latest survey. The increase reflects improved household optimism regarding personal finances and the broader economy, potentially influenced by the Bank of England's recent interest rate cut and a temporary lull in global trade tensions. Despite the improvement, the index remains below its long-run average, indicating ongoing fragile confidence amid persistent price pressures and forecasts of slow economic growth for the latter half of 2025.

Analysis

UK consumer confidence, as measured by GfK, showed a modest improvement in May, with the index rising to -20 from -23 in April, slightly exceeding economists' expectations of -22. This uptick is attributed to increased household optimism regarding personal finances and the broader economic outlook, potentially influenced by the Bank of England's interest rate cut on May 8th and a temporary de-escalation in US trade tensions. However, this improved sentiment must be contextualized: the -20 reading remains considerably below the long-run average of -11, indicating that overall confidence is still fragile. Furthermore, the survey data was collected in the first half of May, prior to the release of official figures showing an unexpected surge in April inflation, which could temper future optimism. The GfK index also exhibits a seasonal tendency to rise in May, having done so in eight of the last ten years, which may partly account for the current increase. The overall picture suggests persistent underlying weakness, with stubbornly high price pressures and an economy forecast for slow growth in the latter half of 2025, reinforcing a cautious outlook despite the marginal gain in confidence.

Key Decisions for Investors

• Investors should interpret the rise in UK consumer confidence with caution, as the index remains well below its long-term average and the survey predates recent data showing a significant increase in April inflation.
• Closely monitor upcoming UK economic indicators, particularly the April retail sales figures and subsequent inflation reports, to assess the durability of this sentiment improvement and its potential influence on future Bank of England policy.
• Given the backdrop of fragile overall confidence, persistent inflationary pressures, and forecasts for slow economic growth in late 2025, a selective and risk-aware approach to UK consumer-exposed assets is warranted until more definitive signs of economic strengthening emerge.