By Xavier Fontdegloria
Confidence among U.K. consumers increased in November for a second consecutive month, partly reflecting the end of political turmoil, but gains in sentiment are expected to be short-lived as the cost-of-living crisis intensifies and the economic outlook darkens.
Research firm GfK said its consumer-confidence barometer rose to minus 44 in November from minus 47 in October. This marks the highest reading in three months, but it is still well below its historical average and close to record lows.
Economists polled by The Wall Street Journal expected the index to increase slightly to minus 46.
“This month’s fillip is likely to reflect nothing more than a collective sigh of relief as a new prime minister takes charge following the alarming fiscal antics we saw in September,” GfK client strategy director Joe Staton said.
All five indicators which form the barometer increased in November compared with the previous month, particularly expectations for personal finances over the next year.
However, this improvement isn’t expected to be sustained as external factors haven’t changed much, Mr. Staton said.
The GfK survey was conducted among a sample of 2,000 individuals who were interviewed between Nov. 1 and Nov. 11, before U.K. treasury chief Jeremy Hunt outlined tax hikes and public spending cuts in his Autumn Statement.
U.K. inflation hit a 41-year high of 11.1% in October due to surging energy prices, while the country’s economy shrunk 0.2% in the third quarter compared with the previous three-month period. While economists and policy makers widely expect inflation to moderate gradually in the months ahead, they also anticipate the economy will face a long-lasting recession.
In this context, good news for consumers remains in short supply, Mr. Staton said.
“Household budgets remain shrouded in massive uncertainty with fresh jumps in food prices, energy still uncomfortably expensive, the prospect of new interest-rate rises pressurising mortgage and rent payments, potential future hikes in council tax and squeezed real pay,” he said.
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