Britons are more optimistic about the prospects for the economy than at any time since the credit crunch began, fuelling hopes that the country may be emerging from the worst of the recession.

Consumer confidence rose for the third month in a row in April, despite dismal figures last week showing that the economy contracted at the fastest pace for 30 years between January and March.

Consumers are now more bullish about the economic outlook than at any time since August 2007 — a month before Northern Rock went bust, according to figures published today by GfK NOP. While the index measuring consumers’ economic expectations for the next year is still in negative territory at -15, it jumped 16 points from -31 in March.

Alistair Darling, the Chancellor, defended his optimistic budget forecasts yesterday that a robust recovery would take hold soon. “I believe that the economy will begin to grow towards the end of this year,” he told the Commons Treasury Committee. “What I wanted to do was to set out a forecast that was realistic and one that we can justify.” However, he conceded that, in considering recent economic news, “if you look at the figures right now, quite frankly they are mixed”.

Further tentative signs that the recession may be loosening its grip on the country emerged yesterday as Santander, Europe’s biggest bank, said that its British arm, which includes the high street banks Abbey, Alliance & Leicester and Bradford & Bingley, saw profits rise by 31 per cent in the first three months of the year.

This upbeat news prompted a flurry of activity on the stock market, pushing the FTSE index of Britain’s 100 biggest companies up two percentage points to close at 4,189.59, its highest level since February 13.

US stocks also surged yesterday despite dismal economic data. While official figures showed that GDP dropped at an annual rate of 6.1 per cent in the first three months of the year, almost equalling the 6.3 per cent drop in the final three last year, investors took heart that consumer spending rose by 2.2 per cent, pushing the Dow Jones up nearly 2 per cent during trading.

Rachel Joy, of GfK NOP, said: “The better figures could be down to a combination of the simple belief that things are improving as well as the feelgood factor of improving weather.”

New evidence showed, however, that many households were feeling the pinch. Average weekly earnings fell in February at the fastest rate since records begin in 2001. Workers’ average weekly pay packets dropped to £459.10, 5.8 per cent lower than in February last year. Private sector workers bore the brunt, seeing a 7.7 per cent drop in their pay. Public sector workers enjoyed a 3.2 per cent rise.

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