UK GfK survey jumped to +7 points, the highest level seen in 15 years and the second highest in 18 years. The headline bounce was driven by a broad-based rebound, as components such as a 'saving opportunity' or 'major purchase opportunity' not only made up for last month's fall but rebounded far beyond it.
The surge in consumer credit is most correlated with confidence in the lower income category, suggesting that these households have been taking on credit to ease their budgetary constraints as wages have only very recently shown signs of real recovery. This was also reflected in the Q1 final national account release showing the saving rate down to 4.9%, the lowest level since Q3 08 and 6.6% lower than the cyclical high reached in Q3 10, notes Barclays.
Given mounting headwinds from fiscal consolidation and the forthcoming referendum on EU membership, the sustainability of the consumer recovery now more than ever relies on higher wages as the potential for an even lower saving rate seems limited, according to Barclays.