Consumer Optimism Edges Up Despite Sticky Inflation and Weaker Jobs Market
● Two in five (44%) UK consumers are optimistic about their household finances over the next 12 months – the highest level in a year
● Inflation remains among top financial consumer concerns with 84% having it in their top three
● Growing divide in optimism between the haves and have nots: 74% of high earners (greater than £80,000 a year) were optimistic versus just 36% of low-income households (less than £30,000 a year).
● Following last year’s budget, TransUnion data showed that consumer optimism dropped from 44% in Q4 2024, to 41% in Q1 2025.
Consumer optimism about household finances has climbed to its highest level in a year, according to data from TransUnion, a global information and insights company, released as part of its Q4 2025 Consumer Pulse report. The latest report found 44% of consumers are optimistic about their finances over the next 12 months, up two percentage points from the previous quarter, and well above the all-time low of 26% in Q3 2022.
With inflation holding at 3.8%[i] in October, 84% of UK adults ranked inflation for everyday goods among their top three financial concerns over the next six months. Recession fears (53%) and interest rates (50%) followed, while concerns about housing costs (40%) and jobs (32%) have both risen by two percentage points since the previous quarter.
James O’Donnell, director of research & consulting at TransUnion in the UK, said: “We find ourselves at a turning point, on the one hand, consumers are increasingly optimistic as they emerge from the inflation-driven cost of living crisis. On the other hand, consumers are increasingly concerned about the weakening jobs market, softer wage growth and inconsistent economic growth. Nonetheless, the broad positivity and pulse of the everyday consumer appears to have been on a slow but steady upward trajectory, though it remains to be seen what impact the budget will have and whether consumer optimism will hold up. We noted that after last year’s autumn budget, our data showed that consumer optimism dropped from 44% in Q4 2024, to 41% in Q1 2025.
Spending and Debt
Rebounding consumer optimism is shaping spending behaviour, as less consumers claim to have cut back on discretionary spending, including dining out, travel, and entertainment – down five percentage points from last year (46% in Q4 2025 from 51% in Q4 2024).Yet, just over one in ten (11%) reported increasing discretionary spending during this period, signalling cautious confidence as households focus on essentials.
Debt pressures also remain, as the proportion of consumers expecting to miss a bill or loan payment stayed steady from a year ago at 19%. However, this rises to 22% among Gen Z consumers, despite this demographic being the most optimistic about their finances over the next 12 months among generations surveyed at 74%. In contrast, only 7% of Baby Boomers expect they’ll be unable to pay at least one of their current bills or loans in full, the lowest of any generation surveyed.
Credit Behaviour
Access to credit and lending products continues to play a vital role in helping consumers reach their financial goals, with over three-quarters (76%) of respondents in agreement. At the same time, nearly three in five (59%) consumers now believe they have sufficient access to credit, increasing by six percentage points year-on-year.
However, credit appetite is cooling slightly. Less than a quarter (22%) plan to apply for new credit or refinance in the next year, down from 24% in the previous quarter and 23% in Q4 2024. Younger generations continue to lead credit demand, with 43% of Gen Z and 35% of Millennials planning to seek credit, compared to 20% of Gen X and 5% of Baby Boomers.
Overall, among those who said they’ll apply for credit or refinance in the next 12 months, applying for a new credit card (49%) remains the most popular credit and loan activity, although that’s down from 54% last quarter. The second most popular credit product and loan activity was applying for buy now, pay later services (26%) which stayed stable, while those who said they’d refinance their mortgage ticked up slightly to 17%. Overall, fewer consumers are reporting abandoning credit applications, from 26% in Q4 2024 to 22% in Q4 2025, with cost (26%) and fear of rejection due to credit history (19%) being among the top reasons.
Credit monitoring also appears to be on the rise, with more than two in five (41%) saying they check their credit report at least monthly. Accuracy checks (37%) and fraud detection (31%) rose from last quarter, while score improvement (33%) has dipped, suggesting consumers are increasingly prioritising protection amid growing fraud risks.
James O’ Donnell, continued: “Even as the general perception appears brighter, financial pressures continue to hold sway over a large portion of the population, with the cost-of-living crisis having had an uneven impact on households. Consumer attitudes, credit behaviours and spending habits seem to be diverging across demographics. In this environment, it’s crucial that businesses and financial institutions understand and adapt to the evolving financial landscape, to support consumers and ensure safe and fair access to credit.”
For more information on the Consumer Pulse study findings, please visit the TransUnion website.
Notes:
Unless otherwise stated, all figures are from TransUnion’s Consumer Pulse study, which is based on the survey of 1,000 adults in the UK, conducted between 25 Sept. and 7 Oct. 2025.
Generations are defined in this research as follows: Gen Z, 18-28 years old; Millennials, 29-44 years old; Gen X, 45-60 years old; and Baby Boomers, age 61 and above.
References to weaker job market are in accordance to the latest Labour market overview, UK - Office for National Statistics.
i ONS Inflation and prices indices, https://www.ons.gov.uk/economy/inflationandpriceindices
