Consumer confidence reaches two-year high
UK consumer confidence has unexpectedly climbed to its highest level in two years, according to research group GfK. Its Consumer Confidence Barometer rose one point in September to -13, beating forecasts and marking the strongest reading since August 2024, just after the last general election. It is also the first time since summer 2024 that the measure has improved for three consecutive months, with households more upbeat about their personal finances and the wider economy.[S1]
Despite the headline improvement, confidence remains in negative territory and the recovery shows signs of stalling. GfK's data indicates consumers are less inclined to make major purchases this month and more focused on saving. The Major Purchase Index was the only measure to decline, falling one point as retailers enter the crucial Golden Quarter, while the Savings Index rose five points, suggesting some households are building a financial buffer.[S1]
Inflation and energy costs threaten recovery
GfK's consumer insights director, Neil Bellamy, remarked that the reappearance of stronger inflation takes away one of the most encouraging features of recent months. Although the headline index keeps edging upward, he pointed out that sentiment remains well below zero, and questioned whether confidence might soon weaken given climbing inflation along with energy and fuel costs. Bloomberg interpreted GfK's figures as evidence that the rebound is losing momentum as pricier energy feeds into inflation.[S1]
These GfK results sit at odds with separate releases. At the start of the week, S&P Global said worries about sharply higher mortgage repayments and growing uncertainty over jobs had driven UK consumer confidence down to its weakest point in three months. After climbing for several consecutive days, UK mortgage rates have levelled off; Moneyfacts put the average five-year fixed rate unchanged at its highest level since October 2023, while two-year deals stay at their highest since July 2024. The typical two-year fixed residential mortgage rate is 5.92%, the same as the prior working day.[S1]
Business and market developments
Bank of England governor Andrew Bailey warned that the economy is experiencing an era of big supply shocks, speaking at a Monetary Economics Conference in Oxford. He described a world of very large and repeated negative supply shocks, though he suggested artificial intelligence could act as a positive shock. Morgan Stanley changed its Bank of England interest rate call on Friday, now predicting hikes in November and February, having previously expected no increases for the foreseeable future, citing worsening commodity market newsflow and an expected growth slowdown at the turn of the year.[S1]
Sterling is on course for its poorest week versus the US dollar in three months, sliding 1.2% over the week as robust American economic figures boosted wagers on higher US interest rates. The currency traded close to three-month lows against the dollar at $1.323 and the euro at €1.162. Airbus shares shed more than 1% after the planemaker disclosed a quality problem in the fuselage structure of its A321neo jets, a flaw Reuters said touches roughly 500 aircraft, about 250 in service and 250 still in production. Airbus maintained the issue poses no safety danger and its planes may keep flying. UK government bonds rebounded after an unsettled session, with two-year gilt yields, which help set mortgage pricing, falling 5 basis points to 4.85%.[S1]
TalkTalk is hurrying to safeguard its future as the prospect of administration looms, nearing agreements to offload its consumer and broadband divisions while trying to protect 900 jobs. The telecoms group announced on Friday that it is in the last phases of finalising sales of its consumer arm and its wholesale unit, PXC, and anticipates wrapping up both deals shortly. Britain's fourth-biggest broadband supplier, launched in 2003 by Charles Dunstone as a Carphone Warehouse subsidiary, has found the fiercely competitive market difficult, with its customer base falling from 4 million in 2019 to roughly 1.5 million.[S1]
