The latest snapshot of household sentiment from Gfk NOP Social Research shows consumer confidence is returning
Britain's consumers became far less gloomy over the past month with the royal wedding, good weather and the realisation that their mortgages would not be going up coinciding with the second-biggest improvement in consumer confidence in recent times.
The latest snapshot of household sentiment from Gfk NOP Social Research showed that overall sentiment picked up from -31 to -21 during May, returning consumer confidence to levels seen last autumn when the economy weakened.
Consumers tend to take a pessimistic view of the economy and the balance was last positive in 2005. Nick Moon, managing director of GfK NOP Social Research, said: "We have seen an almost unprecedented jump in consumer confidence this month. May's figures show the second-largest rise ever; only May 1993 was higher, when it improved by 12 points. In the 449 months that the index has been running, single-month movement on this scale – either up or down – has only occurred on 10 occasions.
"But before businesses celebrate, it should be pointed out that this is just one month's figure and it is far too early to know whether this could be the start of an upward trend. We are improving from a rock-bottom position and consumer confidence is still deeply negative. So, whether the current spring in consumers' step is due to the feelgood factor of the royal wedding and … sunny bank holidays, or to the recent let-up in negative reporting about the economy, [it still means] we are not out of the woods."
While ministers will be hoping the less pessimistic mood heralds the end of the economy's soft patch, a report out on Friday from the Resolution Foundation said average pay in the UK would be no higher in inflation-adjusted terms by 2015 than it was in 2001. The study found that the living standards of people on low to middle incomes were already faltering before the recession, and it was no longer safe to assume they would rise when steady economic growth returns.
The report, entitled Growth Without Gain?, showed that from 2003-2008 median wages flatlined and disposable income per head fell in every English region outside London, despite growth of 11%. In addition, housing costs continued to hit hard, with one in three first-time buyers on a low or middle income forced to take out a 100% mortgage in 2009, and the proportion under 35 and renting trebling from 1988 to 2008.
James Plunkett, author of the report said: "We all know that the recession has hit living standards hard. But something deeper has changed in our economy– even during the so-called boom years, workers weren't seeing their living standards rise. The big question is what will happen when growth resumes – will ordinary workers reap any of the benefits? This report suggests that is far from certain."The study predicted that the squeeze on living standards would continue for the next four years as a result of stagnating wages, high levels of personal debt, a declining share of "middle-skilled" jobs, and cuts to tax credits.