House prices jump, confidence rises

OUTLOOK IMPROVING

Despite this week's data showing the economy grew just 0.1 percent in the last three months of 2009 after an 18-month long recession that wiped out 6 percent of output, consumers are somewhat more upbeat, the GfK survey showed.

It said respondents were feeling more confident about the economic situation over the next 12 months in January, with that measure rising four points to -2. The future personal finance index was up one point to +4.

The housing market has picked up again in recent months thanks to the Bank of England cutting interest rates to a record low of 0.5 percent and pumping nearly 200 billion pounds of newly-created money into the economy by buying mostly government bonds.

Most analysts expect the central bank's asset-buying program to halt in February, particularly given relatively hawkish comments by Bank policymaker Andrew Sentance earlier this week who said that inflation might become harder to control.

But few expect any change to interest rates for some time to come, given that the economy remains in a fragile state.

"Although it is clearly encouraging that economic activity is no longer falling, it remains a long way below the pre-recession level and is not yet growing convincingly," said Gahbauer.