British consumers became slightly less pessimistic in February, helped by the Bank of England’s recent interest rate cut. A survey published Friday showed that expectations for household finances improved, boosting overall sentiment.
The GfK consumer confidence index rose to -20 this month from -22 in January, which had been the lowest level since December 2023. The small increase defied expectations, as a Reuters poll of economists had predicted the index would remain unchanged at -22.
Although confidence remains low, the slight improvement suggests that the central bank’s efforts to ease financial pressure are having some effect. Lower interest rates typically reduce borrowing costs, making mortgages and loans more affordable for households.
Joe Staton, client strategy director at GfK, said the rise in consumer confidence was “encouraging” but warned that uncertainty remains. Many consumers are still struggling with the cost of living, and overall sentiment remains deeply negative.
The survey showed that expectations for personal finances over the next 12 months improved from -2 in January to 0 in February. This suggests that some households believe their financial situation will stabilize or even improve in the coming year.
However, broader economic confidence remains weak. The index measuring general economic expectations for the next year stayed low at -24, reflecting continued concerns about inflation, wages, and economic growth.
The Bank of England’s decision to cut interest rates was aimed at supporting economic recovery and easing financial pressure on households. Policymakers are hoping that lower borrowing costs will encourage consumer spending and investment, helping to stimulate growth.
Despite the modest improvement in confidence, many challenges remain. Inflation, while easing, is still above the central bank’s target, and wage growth has not kept pace with rising living costs. Consumers remain cautious about their spending, which could limit economic recovery.
Retailers and businesses will be watching closely to see if improved confidence translates into higher consumer spending. A sustained increase in confidence could support economic growth, but further improvements may depend on wage increases and continued reductions in inflation.
For now, the latest survey provides a small sign of hope for the British economy. While consumer confidence remains fragile, the Bank of England’s rate cut has given households some relief. The coming months will show whether this trend continues or if economic pressures push confidence back down.
