U.K. Consumer Sentiment Rises To 5-Month High

Confidence among British consumers climbed in January to its highest level in five months, a survey by Nationwide Building Society showed Thursday.

The confidence measure rose to 47 from 38 in the previous month. Economists expected the score to fall to 40. A gauge of consumers' outlook for the economy jumped by 14 points to 64.

The spending index, which reflects consumers' propensity to buy big ticket items, edged up to 78 from 77.

Renewed hope that the U.K. will avoid a double-dip recession may support sentiment, especially since the downward trend in inflation is set to continue through 2012, according to Nationwide's chief economist Robert Gardner.

Squeeze on consumers' purchasing power eased as inflation fell to a 14-month low of 3.6 percent in January from 4.2 percent in December.

The improvement in confidence may prove to be little more than a temporary bounce, Gardner pointed out. The economy contracted 0.2 percent quarter-on-quarter in the December quarter and the unemployment rate hit a 16-year high.

A survey by GfK NOP last month revealed that British consumer confidence climbed to its highest level in seven months in January.

The Confederation of British Industry said this week that the U.K. economy will avoid a technical recession and growth will gain momentum in the second half of 2012.

Meanwhile, the central bank last week decided to infuse an additional GBP 50 billion to the system, taking the total size of its asset purchase to GBP 325 billion. This was intended to support the economy, which continues to face headwinds from recent global developments and weak growth prospects at home.

Releasing the Inflation report on Wednesday, Bank of England policymakers said inflation is likely to undershoot the 2 percent target in two years, though the slowdown may not be as fast as estimated earlier. The central bank expects the recovery path to be slow and uncertain.