British household spending, the main driver of the country’s robust economic recovery, was weak at the start of the year. But a pick-up in wage growth and the lowest inflation in 50 years has boosted disposable income in recent months.
Market research company GfK said British consumers’ mood was now the most buoyant since January 2000, after its monthly sentiment index jumped to +7 in June from May’s +1, the biggest rise in a year.
“We’re seeing a dramatic uptick in confidence this month, a real post-election bounce that’s put a spring in the step of consumers across the UK,” said Joe Staton, an executive at GfK.
Last month’s survey included responses from both before and after Britain’s May 7 election, in which Prime Minister David Cameron’s Conservative Party won an unexpected outright victory.
The Conservatives have said they intend to run a budget surplus without increasing the rate of income tax or sales tax. Instead, they plan significant further cuts to public spending and to welfare payments for low earners.
In May, GfK had said the weak reading in that month’s survey could have been due to concerns about their personal finances under the Conservatives.
This month, GfK said the increase in the index was driven by a big jump in consumers’ willingness to spend on expensive one-off purchases, as well as broader increases in how well people thought their personal finances and the economy as a whole would do this year.
GfK conducted the survey between June 1 and June 17 on behalf of the European Commission.