Brexit shock fades as consumer confidence jumps at highest rate in three years

'Everything could change once details of the deal to leave the EU emerge and the process of extracting ourselves from the Union become a reality' - Stephen Harmston, YouGov

(Reuters)

UK consumer confidence rose the most in more than three years this month as the initial shock from the Brexit vote faded.

An index of sentiment by YouGov and the Centre for Economics and Business Research jumped to 109.8 from 106.6 in July, which was a three-year low. The gauge is still below the level it was a year ago.

While the Brexit vote initially knocked sentiment, it’s not yet clear how this might ripple into economic activity. The Bank of England took pre-emptive action in early August, cutting interest rates and restarting quantitative easing to counter any slowdown.

Measures of household confidence plunged in July, while retail sales actually surged that month as warm weather fueled food and clothing sales.

“For all the talk of doom and gloom -- both in the months leading up to the referendum and in the days following it -- most consumers have yet to feel much tangible impact of the vote,” said Stephen Harmston, head of reports at YouGov.

“It’s clear that the panic that gripped the public in the immediate aftermath of the referendum has subsided as institutions like the Bank of England take decisive action and the result becomes a part of life.”

The economy could still take a real hit from Brexit. The BOE cut its 2017 growth forecast to 0.8 per cent this month, just one third of the pace it previously predicted.

“Everything could change once details of the deal to leave the EU emerge and the process of extracting ourselves from the Union become a reality,” Harmston said.

Bloomberg