‘Burnham Bounce’ struggles to lift UK households from economic gloom

UK consumer confidence weakened in August as concerns over employment intensified, undermining signs of a broader economic recovery and leaving households cautious about their financial prospects.

The S&P Global UK consumer sentiment index fell to 42.9 from 43.4 in July, when confidence reached a four-month high. Any reading below 50 indicates that pessimism remains the dominant mood among households.

The deterioration was driven primarily by growing anxiety over employment. The survey’s job security measure fell to 45.6, its lowest level since April 2023, marking the third consecutive month in which respondents reported increasing concerns about the labour market.

“Recent better growth seen in the economy is failing to feed through to households,” said Maryam Baluch, economist at S&P Global Market Intelligence. “Labour market concerns” were becoming an increasingly important drag on confidence, she added.

The figures come ahead of official labour market data from the Office for National Statistics, which is expected to provide further evidence of a slowdown in vacancies and hiring.

The weakness in sentiment was not universal. The household finance index edged up to 41.2, its strongest reading for five months, while private sector workers reported some improvement in their outlook after months of uncertainty linked to political instability and the conflict in the Middle East.

Technology was another relative bright spot. S&P Global said continued investment linked to artificial intelligence was supporting employment prospects and incomes in the sector, providing some evidence that technology-led growth is beginning to filter into the wider economy.

Future financial expectations also improved modestly, suggesting what S&P Global described as a possible early “Burnham Bounce”.

But the overall reading remains firmly in negative territory. For the government, the combination of weak consumer confidence and deteriorating perceptions of job security presents a more immediate challenge than headline economic growth figures suggest.

The data point to an economy in which businesses may be expanding selectively while households remain reluctant to spend, leaving the durability of any recovery uncertain.