UK consumer sentiment remains elevated despite spending pressure

Investing.com -- UK household sentiment remained elevated in October, marking the second-highest reading since July 2024, according to the latest S&P Global UK Consumer Sentiment Index (CSI) on Monday.

The index fell slightly to 47.4 in October from 47.8 in September but remained above the long-run average of 44.4, indicating continued optimism among UK households despite ongoing financial pressures.

Households reported a reduction in debt levels for the first time in seven months, suggesting more effective management of financial obligations, partly aided by declining borrowing costs.

"The autumn is seeing some of the gloom lift from UK households," said Maryam Baluch, Economist at S&P Global Market Intelligence. "Not only are views on current finances among the highest recorded by the survey since we started collecting data back in 2009, but households also continue to express optimism regarding their financial outlook for the coming year."

The survey showed that solid income growth and higher workplace activity have helped reduce households’ reluctance to make major purchases. Income growth was the fastest in the year to date and among the strongest in the survey’s history, only surpassed by rates observed in December 2024 and July 2024.

Despite these positive indicators, the cost of living crisis continues to impact households. While incomes increased, the amount of cash available for spending decreased markedly in October, with the rate of reduction being the fastest in three months.

The labor market sentiment index remained in positive territory but moderated to 54.2 from 55.2 in September, marking a three-month low. This represents the longest stretch of positive results in the series’ history, dating back to early 2009.

The survey also revealed a widening gap between income groups, with people in the highest income bracket reporting improved financial situations while all other groups reported worsening conditions. Lower earners reported particular concerns about their finances.

Regarding monetary policy expectations, a net balance of +24% of surveyed households predict a rise in the Bank of England’s base rate as the next change in interest rates, up from +18% in September. Nearly half of households (47%) expect a rate hike, while 23% anticipate further loosening.

The S&P Global UK Consumer Sentiment Index is based on a panel of 1,500 UK households, with the latest data collected between October 9-13.