Consumer confidence in the UK continued to improve in August, with shoppers becoming more optimistic about the economy, their personal finances and their retail spending over the next three months, according to the latest date from the British Retail Consortium (BRC).

The survey, conducted among 2,000 UK adults between 4 and 7 August, found that expectations for the state of the economy rose sharply to a net -28 in August, from -36 in July. It was the strongest reading since the historical lows recorded at the start of the Iran conflict.

Expectations for personal finances also improved, reaching -9 compared with -12 a month earlier. More significantly for retailers, consumers’ expectations for their own spending jumped to +8 from just +1 in July.

Overall spending expectations increased more modestly, rising to +15 from +13, while expectations for saving slipped slightly to -5 from -4.

The improvement suggests that consumers are entering the second half of the summer with a more positive view of their financial prospects, although sentiment remains below outright optimism on the wider economy.

Helen Dickinson, chief executive of the British Retail Consortium, said the figures represented a boost for the new Burnham administration but warned that the government would need to address the pressure facing household budgets and retailers if it wants to maintain the momentum.

“Consumer sentiment continued to rise with confidence in the economy hitting its highest level since the historical lows reached at the start of the Iran conflict,” Dickinson said.

She added that expectations for personal finances had improved, driven in part by more optimistic Gen Z consumers, who were also reporting stronger spending intentions.

The BRC said changing weather conditions could also provide a short-term boost to retail. After a period of intense summer heat, more moderate temperatures were expected to encourage consumers to return to shopping.

For retailers, however, the bigger question is whether the improvement in sentiment translates into sustained spending.

Dickinson warned that businesses were already facing pressure from rising costs and regulation, arguing that additional tax and regulatory burdens could ultimately feed through into higher prices for consumers.

“The Budget will be the acid test of this government’s real commitment to growth,” she said, calling for measures to reduce retail business costs, including energy bills and business rates.

The latest figures will provide some encouragement to retailers heading towards the important autumn and Christmas trading periods. The improvement in spending intentions is particularly notable after a prolonged period in which weak consumer confidence and pressure on household finances have constrained discretionary spending.

However, the BRC data also highlights the gap between improving expectations and actual economic confidence. While consumers are increasingly willing to plan for higher retail spending, their outlook for the wider economy remains firmly negative.

The survey also found a slight deterioration in consumers’ expectations for saving, potentially suggesting that some households are becoming more willing to spend rather than increase their savings over the coming three months.

For retailers, the combination of improving personal-finance expectations, stronger retail spending intentions and a modest rise in overall spending represents a more encouraging backdrop than July.

The extent to which that optimism becomes actual spending will depend on whether household finances continue to improve and whether retailers can maintain competitive prices as operating costs rise.