Easing of restrictions lifts UK consumer confidence to pre-pandemic level

UK consumer confidence bounced back more than expected in May and regained all the ground lost to the pandemic, reflecting the reopening of the economy and supporting expectations of a strong consumer-driven rebound in the second quarter.

The UK consumer confidence index, a measure of how people view the state of their personal finances and wider economic prospects, jumped six points to minus 9 in May, according to research company GfK.

This reading was stronger than the minus 12 forecast by economists polled by Reuters and marked the first time confidence had risen to the level seen in January and February last year, before the pandemic.

Joe Staton, client strategy director at GfK, said the “feel-good” factor of reopening businesses combined with continuing vaccination success meant the financial mood of the nation “bounced back to its pre-lockdown levels”.

He added that a rise in the share of consumers saying this was the right time to make major purchases pointed to “more consumers seizing the opportunity to splash the ‘accidental savings’ that some have collected” during the pandemic.

In its May economic monetary policy report, the Bank of England said that as the economy reopened it expected households to spend about 10 per cent of the savings they had accumulated during the pandemic, double the amount previously estimated, fuelling strong economic growth in the second quarter.

May’s surge in consumer mood supports the view of a consumer-driven rebound. “Growing confidence is fuelling the economy and only a reversal into lockdown can dampen this solid momentum,” Staton said.

The GfK survey, based on interviews carried out between May 4 and May 13, showed that improved confidence was largely driven by much brighter views of the economy over the year ahead. People’s views of their personal financial situation remained unchanged from the previous month at above pre-pandemic levels.

The figures are released as separate preliminary data showed that since the reopening on May 17 there had been strong improvements in the activity of hotels and indoor hospitality, sports and entertainment.

Between Monday and Wednesday, the first days of the reopening, average restaurant bookings rose to 33 per cent above the level of the same days in 2019, according to data from Open Table.

On Monday, sales in restaurants, takeaways, pubs and coffee shops, were up 4 per cent compared with the same day in 2019, according to the data analytics company Tenzo, which tracks businesses using their services.

With people flocking back to pubs and restaurants, businesses rushed to hire more staff. On May 14, online job adverts for the category “catering and hospitality” rose 57 percentage points compared with April 9, to 115 per cent of their February 2020 average.

Together with stronger job vacancies in logistics and retail, which rose for the first time to above pre-crisis levels, total job adverts climbed to 114 per cent of their February 2020 average on May 14, an 8 percentage point increase compared with the previous week.

Howard Archer, chief economic adviser at the EY Item Club, a consultancy, said that improvement in the labour market and brighter consumer sentiment were “very positive developments” and “certainly supportive to hopes that consumers can and will play a leading role in the UK’s robust recovery developing from the second quarter”.