Thursday, December 14, 2017

Consumer confidence improves slightly since November’s plunge

24

A long-running consumer confidence index has shown that while it picked up in January, a combination of Brexit nerves and the devalued sterling are expected to take their toll on shoppers.

The GfK Consumer Confidence Index showed a reading of -5 for the month, an improvement on December’s -7.

The news follows yesterday’s figures from Deloitte, which shows consumer confidence dropped to -6 between September and December last year compared to -5 in the prior quarter.

In contrast, data from the YouGov and Cebr Consumer Confidence Index last week revealed that January saw the biggest month-on-month increase in five months, with the index reaching its highest point since September.

“Despite strong GDP and record FTSE highs, the combination of Brexit jitters, Blue Monday, and a wobbly pound pushing up prices contributed to keeping UK consumer confidence negative at -5 this month,” GfK head of market dynamics Joe Staton said.


READ MORE: Consumer confidence edges up, but still limps home to round out 2016


In a sign of people tightening their budgets, the index also showed a dip in the big ticket purchase index, from 12 to 10.

Meanwhile, consumers were feeling upbeat about their personal financial situation for 2017 – with a four-point increase to 7 – but concerns about the wider economy are dragging on the overall outlook.

Adding to this is the expectation that inflation will rise further in 2017, after the 1.6 per cent rise in December, as the cost of imports surge due to the weakened pound.

While most British retailers have dodged the impacts of the sterling’s collapse through hedging practices, they may be forced to raise prices down the track as those positions expire.

“Is the decline in the major purchase index this month a foretaste of slowing consumer spending throughout 2017?” Staton said.

“Rising inflation and weak income growth is forecast to squeeze households’ disposable income, and these two factors could conspire to depress confidence for the year ahead.

“It’s certainly difficult to see where the oomph will come from over the short term.”

The GfK‘s index on sentiment surrounding the general economic situation during the past 12 months rose two points to -24, but this was still 21 points lower in January 2016.

For the year ahead, sentiment stood at -23 for January compared to -5 this same time last year.

Click here to sign up to Retail Gazette’s free daily email newsletter