U.K. Consumer Confidence Rose in December as Fuel Costs Fell

By Brian Swint

Dec. 19 (Bloomberg) -- U.K. consumer confidence improved in December as the cost of gasoline fell and the government cut taxes, GfK NOP said.

An index of sentiment, based on a survey of 2,000 people between Dec. 5 and Dec. 14, rose to minus 33 from minus 35. While the figure is still 19 points lower than a year ago and optimism about the economy waned this month, a gauge measuring shoppers’ willingness to make large purchases rose 10 points.

Lower energy costs and discounted goods helped bolster retail sales in November even as Britain struggled with the recession. Prime Minister Gordon Brown has cut sales tax as shoppers look for holiday bargains and benefit from a drop of 3 percentage points in the interest rate in the past quarter.

“There is perhaps a glimmer of hope,” Rachael Joy, a spokeswoman for GfK, said in a statement. “High street deals and the small reduction in value-added tax have improved consumers’ views. The crucial question for the economy is whether the improvement in this index will be translated into activity on the high street.”

The median pay award in 79 salary agreements was for a 3.8 percent raise, the same as for October and higher than the 3.5 percent increase in the previous three months, Industrial Relations Services said in London in a separate report today. That’s higher than the 3 percent increase in the retail price index used by wage bargainers for the first time in more than two years.

Inflation Slows

Consumer-price inflation slowed to 4.1 percent last month after peaking at 5.2 percent in September. Oil prices have fallen by about two-thirds since reaching a record in July, and the government temporarily reduced sales tax to 15 percent from 17.5 percent on Nov. 24.

Retail sales rose for the first time in three months in November, the statistics office said yesterday. The price of a gallon of unleaded gasoline fell to $5.15 last month, down from $9.02 in June, according to AA Motoring Trust Trading Ltd.

Bank of England Governor Mervyn King said this week that the inflation rate may drop below 1 percent next year as the economy contracts. The central bank lowered the benchmark interest rate to the lowest since 1951 this month to help the economy out of the recession.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.