United Kingdom: Consumers grow less gloomy in May, despite falling real wages
May 31, 2017
The GfK NOP consumer confidence indicator rose from minus 7 points in April to minus 5 points in May. The index remains entrenched in negative territory, where it has been since April of last year, highlighting that consumers are still broadly pessimistic.
May’s figure reflects more optimistic sentiment regarding the personal financial situation of consumers over the last 12 months and for the year ahead. Consumers also grew less downbeat concerning the global economic situation over the last 12 months, while they remained equally down in the dumps when it came to the general economic situation over the next year. Surprisingly, given the rapid rise in inflation and the recent news that real wages are now falling again, consumers declared that they were more willing to make major purchases in May. Despite May’s slight uptick in consumer confidence, living standards will continue to be pinched going forwards due to higher inflation. Coupled with a period of great political turbulence on the horizon when the country’s initiates Brexit talks with the EU later this month, this points towards a bumpy ride for consumer confidence in the months ahead.
According to Joe Staton, Head of Market Dynamics at GfK, “Although the Overall Index Score is bumping along in negative territory, we haven’t seen any significant fall of the kind we might expect during such periods of pre-election and pre-Brexit uncertainty. Perhaps the real squeeze in living standards is yet to hit home. After years of people paying off debts post-downturn, unsecured borrowing has steadily increased since 2014 reaching record highs this month. When will we get our comeuppance and realise we have to ‘pay-the-piper’?”
Author: Oliver Reynolds, Economist