UK consumer sentiment picks up in August

(Sharecast News) - UK consumer sentiment picked up in August after the Bank of England cut interest rates, according to a survey released on Monday. The S&P Global consumer sentiment index increased to 47.0 from 45.1 in July. This marked the highest reading since last October's Budget announcement, with all the subcomponents of the headline index registering a rise.

A reading above 50.0 indicates an improvement, while a reading below signals a deterioration in sentiment.

The household finance index rose to 46.0 in August from 43.6 the month before, while the spending sentiment index ticked up to 41.2 this month from 37.7 in July.

The labour market sentiment index rose to 54.7 from 52.4 and the debt sentiment index printed at 50.2 in August, up from 48.9 in July. Finally, the savings index edged up to 43.1 from 42.7.

Maryam Baluch, economist at S&P Global Market Intelligence, said: "August CSI data comes hot on the heels of the recent rate cut decision made by the Bank of England earlier in the month. Data collection began just a day after the central bank's announcement, providing a timely snapshot of sentiment in the wake of monetary policy easing. Encouragingly, the data reveals a slight revival in household confidence, which is a telling sign that the easing of monetary policy has been received positively by households across the country. The headline index signalled the strongest reading since last October, greatly bolstered by robust perceptions of labour market conditions, which were the second strongest in the survey's history.

"Households reported less of a squeeze on their finances, and the year ahead outlook was the least pessimistic in nine months. This positive shift indicates less concern among consumers regarding their financial situation. Moreover, households accumulated debt to the least marked degree in three months, despite reporting a greater availability of credit.

"Despite the recent uplift in consumer sentiment, particularly regarding perceptions of the labour market, this positive shift occurs against a backdrop of subdued UK economic performance. Lower borrowing costs could provide a further boost to consumer sentiment. Indeed, if the uptick in sentiment can be sustained, it could translate into better fortunes for the wider UK economy."

The latest data were collected between 7 and 11 August.