UK consumer confidence 'improves'

January sales are crucial to UK retailers

UK consumer confidence has improved for the second month in a row, a survey has shown, suggesting the recent cuts in VAT and interest rates are working.

The consumer confidence index from market research group GFK NOP rose by two points to -33 in December. However, it remains near all-time lows.

The rise was led by an increased confidence in making major purchases.

Its survey comes a day after official figures showed a surprise increase in retail sales in November.

Lower petrol price

The GFK NOP study said the major purchases sub-index jumped 10 points to -29, but still stands 15 points lower than this time last year.

The crucial question is whether the improvement in this index will be translated into activity on the High Street during the January sales Rachael Joy, GFK NOP

It also found that consumers are now less likely to save money than they were last month, and that they are far less optimistic about the general economic situation over the next 12 months.

The sub index measuring how people think the economy will perform over the next year fell by five points, to -41.

"The Consumer Confidence Index has improved again this month after the interest rate cut and the drop in petrol prices, but continues to hover at near record lows," said Rachael Joy at GFK NOP.

"The crucial question is whether the improvement in this index will be translated into activity on the High Street during the January sales," she added.

The government has cut VAT from 17.5% to 15% until the end of 2009 in an attempt to boost consumer spending and increase economic activity. For its part, the Bank of England has reduced interest rates from 5.5% to 2% in recent months.