British shoppers are growing more confident, but can it last?

British consumer sentiment has recorded its biggest improvement in nearly four years this month as coronavirus lockdown restrictions ease, though it remains far below its level at the start of this year, a survey showed on Friday.

The GfK consumer confidence index, the United Kingdom’s longest-running such survey, increased to its highest level since March at -30, up from -36 in late May, which was the lowest reading since the depths of the 2008-2009 financial crisis.

The improvement matches other data showing some recovery since economic output collapsed by an unprecedented 20 percent in April, when many businesses suspended operations, shops closed to the public and workers were told to stay home where possible.

However, GfK said the improvement was not guaranteed to last.

“With the labour market set for more job losses, we have to question whether we are seeing early signs of economic recovery or that infamous ‘dead cat bounce’. Most bets will be on the dead cat,” GfK director Joe Staton said.

Bank of England Governor Andrew Bailey said on Thursday that the economy appeared to be on course to shrink less in the first half of the year than he had feared last month, though this did not necessarily mean there would be a strong rebound.

More than nine million workers currently unable to do their jobs due to the lockdown have been cushioned from the immediate risk of unemployment by a government wage support programme. But this is due to end in October and it is unclear if sectors such as hospitality will be back operating at normal capacity then.

The GfK survey, which is conducted on behalf of the European Commission, is more than 20 points lower than its level at the start of this year.

The improvement in June was the sharpest in nearly four years, and was driven by households’ greater confidence in the outlook for their personal finances and the general economy over the next year, as well as more willingness to make big purchases.

 

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