UK data released in May 2026 painted a mixed picture of the domestic economy: official figures continued to show payrolled employment falling, extending a run of monthly declines, even as the closely watched GfK Consumer Confidence Index posted its strongest reading since the previous autumn, defying expectations for a further slide. The divergence highlighted how households and the labour market were, for now, telling different stories about the UK economy.
Payrolls Extend Their Downward Trend
HMRC's real-time information data showed the number of payrolled employees in the UK falling by 28,000 between February and March 2026, continuing a run of monthly declines that has persisted for much of the past year. The Office for National Statistics has repeatedly cautioned that early estimates for the most recent months are provisional and subject to revision, but the broader direction has been consistent: demand for workers cooling, vacancies easing, and pay growth gradually losing momentum as employers turn more cautious about hiring. The unemployment rate has also drifted higher over the period, and vacancies have fallen to their lowest level in several years, reinforcing the picture of a labour market that has cooled steadily rather than suddenly. The wholesale and retail sector accounted for the largest share of the decline, while health and social work remained one of the few areas still adding staff, illustrating how the slowdown has been concentrated rather than economy-wide.
Consumer Confidence Rebounds Sharply
Against that backdrop, GfK's long-running Consumer Confidence Index rose two points to -23 in May 2026, up from -25 in April, which had marked the index's lowest reading since October 2023. The improvement beat economists' expectations for a further decline and was broad-based: the measure of personal finances over the past year rose four points to -7, and expectations for the general economic situation over the next 12 months climbed five points to -38, though the Major Purchase Index slipped two points to -20 as households stayed cautious on big-ticket spending.
Reconciling Two Diverging Signals
GfK's Consumer Insights Director Neil Bellamy noted that consumers appeared to be in a "more generous mood" in May even as major purchase intentions fell, pointing to a nuanced improvement rather than a uniform one. Economists have suggested the gap between softening payrolls and firmer sentiment partly reflects households looking past near-term job insecurity toward slowing inflation and the prospect of further Bank of England rate cuts, which would ease borrowing costs and support real incomes even if hiring stays subdued. Retailers and consumer-facing businesses will be watching closely to see whether the improvement in sentiment translates into firmer spending over the summer months.
What It Means for Traders
For traders, divergent UK data points such as these complicate the read on sterling, since a softer labour market argues for a more dovish Bank of England while resilient consumer sentiment can support the domestic growth outlook. Watching how the two data sets evolve together, rather than reacting to a single release, is important for gauging the UK's underlying momentum, particularly around scheduled ONS and GfK publications, which routinely move GBP crosses in the hours after release.
Daily market analysis by BCM Markets.