UK consumer confidence unexpectedly reached its highest level in over two years in September, with GfK's Consumer Confidence Barometer climbing one point to -13, according to market research firm GfK. The index beat expectations of -16 and represents the highest reading since August 2024, as reported by Reuters. This improvement was supported by improving household personal finance sentiment, with households becoming more optimistic about their financial position despite persistent concerns over the cost of living and broader economic environment.
British business activity slowed significantly in September, with the S&P Global UK Services Purchasing Managers' Index falling to 51.7 from 52.5 in August, marking a three-month low according to Reuters survey data. The preliminary reading came in below the 52.0 forecast in a Reuters poll of economists, indicating weaker-than-expected performance. Services companies, which account for a large share of Britain's economic activity, reported their fastest increase in prices charged in four months. Input cost pressures also accelerated, partly reflecting higher energy costs linked to the escalating conflict in Iran.
The weaker business activity is consistent with quarterly economic growth of about 0.1%, significantly below the 0.4% expansion recorded in the second quarter, as reported by S&P Global. This subdued performance comes as Finance Minister John Healey seeks to maintain a positive outlook for the British economy ahead of the October 28 budget. Recent business and consumer data had pointed to greater resilience, but higher government borrowing costs and renewed inflationary pressures are complicating the outlook. The conflicting signals from business surveys and consumer confidence data suggest mixed economic momentum.
Manufacturing provided a more positive signal, with the flash manufacturing PMI rising to 52.0 in September from 51.7 in August, supported by stronger domestic orders, according to Reuters. Confidence in the manufacturing sector reached a seven-month high. This improvement follows a separate survey from the Confederation of British Industry showing factory orders in September reached their strongest level since July 2023. Despite the manufacturing improvement, the broader composite PMI, which combines services and manufacturing sectors, declined to 51.7 from 52.5.
The conflicting readings between business surveys and consumer confidence data highlight the complex economic environment facing the UK. While GfK's consumer confidence index reached its highest level in over two years, surveys conducted by the British Retail Consortium and Opinium, as well as S&P Global, have pointed to weaker consumer confidence. The improvement in consumer sentiment is supported by improving household personal finance sentiment, but confidence remained firmly in negative territory, highlighting that households continue to have concerns about the economic outlook. With inflation pressures rising while overall growth remains modest, the latest PMI figures underline the difficult economic environment facing the government as it prepares its first budget next month.
