The Bank of England faces growing pressure to raise interest rates after inflation jumped to its highest level in nearly ten years in October.

Consumer confidence rose in July as low-income households received cost of living payments from the government’s support package.

A two-point increase was the first rise since November 2021 on the index compiled by YouGov and the Centre for Economics and Business Research. Consumer confidence had fallen by nine points in the seven months to July.

The biggest rise was in participants’ perceptions of household finances. Their view of their personal finances over the past month rose by 5.3 points to 60.3 and their expected outlook for the next year rose by 3.1 points to 51.8.

Around eight million households on means-tested benefits received £326 at the end of July. A second payment will be made in the autumn. The £21 billion cost of living package announced in the spring included a £400 discount on energy bills and an extra £650 for the poorest families. However, the overall outlook for finances remained weak.

Job security expectations edged even higher, up by 1.3 points to 93.7, with job vacancies still at a record high. The outlook for business activity rose as participants said workplaces were busier.

“The strongest upward momentum in July came from the backward and forward-looking household finance indicators,” said Kay Neufeld, head of forecasting at CEBR. “Nevertheless, the increases in these measures are from an extremely low base and the outlook remains challenging.

“Questions remain regarding the type of support households can expect over the coming months, with the energy price cap set to rise to new record highs in October and January.”

She added that the rise in consumer confidence may be short-lived if a recession materialises this year.

Read more:
Cost of living support gives consumer confidence a lift

* This article was originally published here