LONDON (Reuters) – British consumers and businesses turned more confident in May, a sign that the economy is recovering from a weak start to 2018, according to surveys published on Thursday.
Households felt more upbeat about their personal finances, market research firm GfK said, while two surveys of companies suggested they were coping with uncertainty about Brexit.
The Bank of England is watching for signs that a near stagnation of the economy between January and March was only a temporary slowdown, caused by unusually cold weather, before it resumes its plan to raise interest rates gradually.
The GfK gauge of consumer confidence matched its highest level in a year, rising to -7 from -9 in April, just above the median forecast of -8 in a Reuters poll of economists.
Continued pessimism among consumers about the outlook for the economy, while less deep than in April, weighed on the overall index.
“We have been at zero or negative for 29 months now,” GfK’s client strategy director, Joe Staton, said. “When will the strong jobs market and rising real incomes, coupled with ongoing low interest rates and low levels of headline inflation, have an impact?”
There are signs that the hit to consumers’ spending power has eased after the double whammy last year of a post-Brexit vote jump in inflation and weak wage growth.
But households remained cautious about making big outlays. GfK’s major purchase index slipped by two points in May to 1.
“Shoppers are still not showing signs of a willingness to splash-the-cash,” Staton said.
Lloyds Bank’s index of business confidence was up by three points at 35 percent in May, its highest level of 2018.
The survey also showed the proportion of firms expecting Brexit to help their business rose to its highest level this year at 35 percent while 28 percent expected a negative impact.
“Business confidence is rising and firms appear to be brushing off the economic slowdown in the first quarter,” Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said.
Another survey of small and medium-sized manufacturers showed 53 percent of respondents intended to hire more staff over the next six months, up five percentage points from three months ago and the highest level in over two years.
But companies were a bit more reluctant to invest with 48 percent planning to spend on new machinery and premises, according to the survey of almost 300 firms conducted by South West Manufacturing Advisory Service, a consultancy.
Additional reporting by Coran Elliott; Editing by Alistair Smout