The reopening of the economy pushed UK consumer confidence to its highest level since the first Covid-19 restrictions and boosted consumer spending to above pre-pandemic levels, suggesting that the economy rebounded at the start of the second quarter.
The UK consumer confidence index, a closely watched measure of how people view the state of their personal finances and wider economic prospects, rose one point to minus 15 in April, according to research company GfK.
The reading, based on data collected between April 1 and April 13, largely before the reopening began in England on April 12, was the highest level since February 2020, before the first Covid-19 restrictions started.
Joe Staton, client strategy director at GfK, predicted further improvements in confidence as the recovery gains momentum. “Confident consumers will continue to spend and drive the wheels of UK finances into the summer and beyond,” he said.
The sub-index tracking views on prospects for personal finances was strong, with a 10 percentage point gap in favour of people expecting their situation to improve over those expecting a deterioration. The measure of views on the general economic outlook over the next year rose 6 percentage points compared with March, reflecting increased expectations of a rebound during the second half of 2021.
Early high-frequency data on purchases and mobility showed a quick recovery in spending as the economy reopened.
Spending in the week to April 18 was 5 per cent above the equivalent week in 2019, according to Fable Data, which tracks credit card transactions. The figures covered the period after the reopening of non-essential shops, the hospitality sectors and personal services such as hairdressers and it was the first week this year that spending beat the equivalent week in 2019.
“Improvement was seen across a range of sectors,” said Avinash Srinivasan, an analyst at Fable Data, adding that the hard-hit clothing and hospitality sectors both recorded strong sales growth.
Higher consumer spending was confirmed by credit and debit card transaction data published on Thursday by the Office for National Statistics. In the week ending April 15, the value of credit and debit card purchases increased by 8 percentage points from the previous week to 91 per cent of its February 2020 weekly average, and the highest level since December.
The ONS also reported that 77 per cent of businesses were trading in the two weeks to April 18, up from 71 per cent in early January. The share of businesses for which turnover was below normal expectations dropped to the lowest percentage since comparable estimates began in June 2020.
Separate measures of consumer activity, such as retail footfall, use of cars and public transport and restaurant bookings, “recovered impressively”, said Andrew Goodwin, an economist at Oxford Economics.
These measures are increasingly monitored because they are more timely, albeit less comprehensive, indicators of economic activity than official data and they point to a rapid recovery from the output contraction forecast in the first quarter.
“The data backs our call that the rebound in activity in Q2 will be very strong as the economy reopens, with growth around 5 per cent to 5.5 per cent, echoing the experience of last summer,” Goodwin said.