UK consumer confidence stays weak as Brexit caution dominates
It may have been a balmy summer in the UK so far, but consumer confidence has been decidedly cool and the latest figures from GfK on Tuesday showed just how weak sentiment has been.
The research specialist said that the index dropped during the month to hit -10, which means that the Overall Index Score has now registered at zero or negative since February 2016. It had been at -9 in June and -7 in May.
“Concerns about our personal financial situation, and especially the general economic outlook, have contributed to this long slump,” said Joe Staton, Client Strategy director at GfK. And he predicted “more bad news for retailers too in the form of the Major Purchase Index”. It’s always worrying when that one falls as it directly relates to willingness to spend and it dropped below zero to -2 in July.
What exactly is it that’s driving the confidence drop? You guessed it. Step forward Brexit uncertainty. GfK said that “in the medium-term, and during the uncertainty in the run-up to the UK leaving the European Union in eight months, it is hard to forecast what kind of good news will change the numbers from negative to positive, or indeed where such good news would originate.”
And Staton thinks there could be worse to come as “any bad news such as a surprising uptick in inflation with the expectation of a corresponding increase in interest rates, or any adverse political event either at home or abroad, would likely have an exaggerated downward drag on consumer confidence.”
Looking more closely at the figures, the index measuring changes in personal finances over the last 12 months actually increased one point in July to +1, and the measure for personal finances in the year ahead rose one point to +7. Both of them are higher than a year ago (up three points and five points, respectively), but the increases don’t seem to be translating into spending activity.
The measure for the General Economic Situation of the UK in the last 12 months didn't budge compared to June, sitting at -28, although again, this is three points higher than July 2017.
Forward-looking expectations for the country’s economy dropped one point to -26, two points higher than July 2017. The Major Purchase Index fell two points this month to -2, one point down year-on-year, while the Savings Index increased one point to +9 in July, four points higher than a year ago. Any increase in the Savings Index is suggestive of consumers who are determined to hang on to their cash just in case conditions get worse and they need an emergency fallback.
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