UK consumer confidence improves in August

The GfK Consumer Confidence Index for the UK climbed to -17 in August 2025 from -19 in July, marking the strongest reading in a year and extending a gradual recovery in household sentiment.

The improvement was partly supported by the Bank of England’s recent interest rate cut, which eased pressure on borrowing costs and mortgage repayments, helping to stabilize household budgets. However, the index remains firmly in negative territory, highlighting the lingering headwinds of sticky inflation, a softening labor market, and expectations of higher taxation to fund government spending commitments.

Households grew more optimistic about their personal finances, with sentiment improving three points for both the past 12 months (to -4) and the year ahead (to +5), the latter standing out as one of the few positive readings in the survey. The gains suggest that lower debt-servicing costs are providing some breathing room for consumers, even as living costs remain elevated.

Views on the country’s overall economic situation were less upbeat. Sentiment for the past year rose two points to -42, though still seven points below levels recorded in August 2024, indicating that consumers perceive conditions as somewhat less dire but far from healthy. Expectations for the next 12 months slipped one point to -30, showing persistent pessimism about the economic outlook, especially with uncertainty around fiscal policy, global trade disputes, and the broader investment environment.

Meanwhile, the major purchase index, which tracks confidence in spending on big-ticket items such as cars and appliances, rose two points to -13. While still negative, the uptick hints at tentative signs that households may be more willing to loosen their spending restraint, particularly if interest rate cuts continue to lower financing costs.

Overall, the data highlights a cautious but fragile recovery in consumer sentiment. Households appear slightly more confident about their own finances than the wider economy, reflecting the interplay between lower borrowing costs and structural concerns over inflation, jobs, and taxation. Looking ahead, the trajectory of consumer confidence will likely depend on how quickly inflation moderates, whether the labor market avoids a sharper downturn, and how the Bank of England balances further easing with its inflation mandate.