UK consumer confidence surges to pre-Brexit levels - survey

Official data have shown strong retail sales and no immediate sign of a big hit to employment.

Britain’s referendum on leaving the European Union. Picture: Facebook.

LONDON - British consumer morale rocketed back to pre-Brexit levels in September, a survey found, confounding expectations that the vote to leave the EU would wreak more lasting damage on Briton's willingness to spend.

Market research firm GfK's gauge of consumer confidence suffered its sharpest drop in over 26 years in July as economists said Brexit would pitch the economy into recession, but data suggests Britain has avoided a rapid slump.

The GfK index, based on an online poll of 2,000 people, rose to -1 in September from -7 in August, the biggest increase since June last year and restoring levels seen in the months before the June 23 referendum.

Analysts polled by Reuters had expected a score of -5 for September.

"British consumers appear to have shrugged off Brexit fears about the economy as wages continue to grow faster than prices, rising employment boosts income, and low interest rates encourage people to spend rather than save," said Joe Staton, GfK's head of market dynamics.

Expectations for the general economic situation over the next 12 months improved to -9 from -22 in August but remained seven points lower than a year ago.

Official data have shown strong retail sales and no immediate sign of a big hit to employment, though wage growth slowed slightly in the third quarter.

But Staton suggested the rebound in confidence was fragile.

"Are we seeing misplaced consumer optimism in which any kind of bad news, economic or political, sends the Index reeling once again?"

Economists expect inflation pressure from the pound's slump since the June will start to erode consumers' spending power in the months ahead.

A separate survey from Asda, the British supermarket arm of Wal-Mart, suggested disposable income among households has remained largely flat for the last five months.

British families had 201 pounds of discretionary spending during August, up 5.3 percent compared with a year ago, the Asda Income Tracker showed.

"(While) the initial turbulence has been navigated, improvements in household finances have slowed, a process that could accelerate if rising production costs begin to feed into prices at the tills," said Sam Alderson, economist at consultancy Cebr, which compiles the Asda survey.

Another poll by YouGov and Cebr on Wednesday said confidence remained slightly below pre-Brexit levels. It said anxiety over the start of formal exit talks with the EU next year, when the impact of Brexit will become clearer, was acting as a "handbrake" on the recovery in consumer morale.