UK consumer confidence recorded its biggest monthly rise in almost three years in July, as political change, England’s World Cup performance and warm weather lifted shoppers’ mood.
The GfK consumer confidence index jumped six points from -23 in June to -17 in July, marking its highest reading since January and its largest monthly improvement since November 2023.
The increase was substantially stronger than economists had expected, with a Reuters poll forecasting that the index would rise by only two points to -21.
GfK attributed the uplift to a combination of optimism surrounding Andy Burnham’s move into Downing Street, England’s progress at the World Cup and the hot summer weather.
Consumers’ assessment of the economy over the past year climbed 10 points to -39, its strongest level since late 2024, while expectations for the economy over the coming 12 months rose eight points to -28.
In a potentially positive signal for retailers, GfK’s major purchase index also increased eight points to -12, reaching its highest level since the beginning of the year.
GfK consumer insights director Neil Bellamy said July had produced a “wave of optimism”, with the prospect of a fresh political start contributing to the rebound.
He added that hopes of an easing in Middle East tensions and lower fuel prices had initially supported sentiment, while the World Cup provided an additional ‘feelgood factor’.
Retail sales rise amid warm weather
The improvement in confidence coincided with stronger-than-expected retail trading.
Separate figures from the Office for National Statistics showed retail sales volumes increased one per cent in June, following a 1.2 per cent rise in May.
Sales volumes were also 4.2 per cent higher than in June last year, while retail sales grew 0.6 per cent during the second quarter compared with the previous three months.
The ONS said promotions and warm weather helped drive demand at clothing and online retailers, while department stores and technology specialists also recorded quarterly growth.
The figures suggest retailers benefited from shoppers buying summer clothing and seasonal goods, alongside increased spending associated with the football tournament.
However, the GfK index remains firmly in negative territory, indicating that pessimists continue to outnumber optimists.
Consumers were also more cautious about their household finances than the broader economy, with their outlook for their personal financial position improving by only two points during July.
Cost pressures threaten rebound
The confidence survey was conducted between 1 and 14 July, after Burnham entered parliament but before he became prime minister.
It also predated renewed conflict in the Gulf, which has pushed up oil prices and increased concerns that inflation could rise again.
UK inflation fell from 2.8 per cent in May to 2.6 per cent in June, its lowest rate since December 2024.
However, higher energy and transport costs could reverse some of that progress, putting renewed pressure on household budgets and retailers’ supply chains.
Bellamy cautioned that sustaining the improvement would depend on the government delivering against continued cost-of-living pressures and weak economic growth.
While July’s figures offer retailers grounds for cautious optimism, the uplift may prove temporary unless stronger sentiment translates into sustained discretionary spending beyond the summer and World Cup boost.
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