LONDON (Reuters) - Consumer confidence shot up to a two year-high in May as people became more optimistic about their own finances and the economy in general despite interest rates going up, a survey showed on Thursday.
The GfK NOP’s consumer confidence barometer jumped four points to -2 this month, the highest level since July 2005. Analysts had expected a deterioration to -7.
The rise in confidence is welcome news for finance minister Gordon Brown who becomes prime minister next month. It follows other polls showing an increase in support for his Labour Party after Tony Blair announced he would step down.
“This month the UK consumer has certainly seen some changes: interest rates have increased again to 5.5 percent, Tony Blair announced his resignation date and local elections have been held,” said Carol Bernasconi, divisional director at GfK NOP.
Tax cuts announced in his March budget may have also cheered people up even although the Bank of England raised interest rates for the fourth time in a year at the start of May. Most economists expect another increase in the months to come.
The GfK survey index measuring people’s mood over their finances rose two points to +13 and the one for the general economic situation jumped 8 points to -10, the highest since May 2005.
Consumers, however, have become more reluctant to make major purchases with the index to measure this dropping 2 points to +4.