UK consumers shake off Brexit as economic optimism surges

Amsterdam - UK consumers appear to be shrugging off some initial Brexit concerns as their worst fears about the economy are allayed.

GfK said on Friday that its confidence index increased 6 points to minus 1 in September, regaining the ground lost after the vote to leave the European Union in June.

Households’ expectations for their personal finances improved, as did the outlook for the economy. That measure jumped 13 points to the second highest this year.

"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, head of market dynamics at GfK.

Nevertheless, Staton cautioned that there are still risks that could undermine sentiment.

"Will confidence continue to rise?" he said. "Or are we seeing misplaced consumer optimism in which any kind of bad news - economic or political - sends the index reeling once again?"

The improvement in sentiment isn’t translating into stronger demand for housing, according to Nationwide Building Society.

The lender said on Friday that annual price growth eased in September amid what it says was "subdued" demand.

That comment came a day after the Bank of England said that mortgage approvals fell to the lowest in almost two years in August.

The pace of home-price inflation is still above 5%, driven in part by a shortage of properties and a supply-demand imbalance.

"The relative stability in the rate of house price growth suggests that the softening in housing demand evident in recent months has been broadly matched on the supply side of the market," said Robert Gardner, chief economist at Nationwide.

"The number of homes on the market has remained close to all-time lows."

The recovery in consumer strength since the Brexit vote is being mirrored in a brighter outlook among executives.

Separately on Friday, Lloyds Bank said its business barometer increased 8 points to 24 in September, though it’s still below the long-term average of 32.

There was a significant increase in economic optimism, pushing that gauge to a post-referendum high, it said.

The view was tempered by a "more subdued reading" for companies’ own prospects, according to LLoyds.