U.K. Consumer Confidence Increased to 14-Month High in June

By Jennifer Ryan

June 30 (Bloomberg) -- U.K. consumer confidence increased to the highest level in 14 months in June as shoppers became more optimistic that the recession is past its worst, GfK NOP said.

An index of sentiment rose 2 points to minus 25, the strongest result since April 2008, the market researcher said in an e-mailed statement today in London. The gauge of confidence about the economic outlook for the next year climbed 8 points to minus 8.

Unemployment claims rose less than economists forecast in May, and business surveys have indicated that the economic slump is starting to abate. Bank of England officials say that the credit squeeze threatens to delay a recovery and data yesterday showed net mortgage lending rose at the slowest pace since records began in 1993.

“Confidence still remains fragile as uncertainty about the strength of any recovery and an increase in unemployment all mean that consumers remain wary,” Rachael Joy, an analyst at GfK, said in the statement.

Four out of five indexes used to compile the confidence report rose on the month, including measures reviewing and predicting personal finances and the general economic situation. The only decline was on the gauge showing the climate for major purchases, which fell four points to minus 26. GfK questioned 2001 people from June 12 to June 21.

Unemployment Claims

Claims for jobless benefits rose in May by 39,300, a third less than economists forecast, the smallest increase since July last year. The broader unemployment measure using International Labor Organization standards increased to the highest since November 1996 in the three months through April.

The Bank of England kept the key interest rate at a record low of 0.5 percent this month and reiterated its program to stoke economic growth by buying 125 billion pounds ($207 billion) of bonds with newly created money. Deputy Governor Charles Bean told lawmakers that the worst of the economic contraction may be past and consumer spending has been “more resilient than one might have expected.”

At the same time, Governor Mervyn King said he feels “more uncertain now than ever” on the strength of the economic recovery as officials work to resolve problems in the banking system. He affirmed forecasts that the economy won’t return to growth on an annual basis until the second half of 2010.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net