United Kingdom: Consumers grow more pessimistic in July
August 22, 2017
The GfK NOP consumer confidence indicator dropped from minus 10 points in June to minus 12 points in July, compounding June’s sharp fall and matching last year’s post-referendum score. The index hence moved further into negative territory, where it has been since April of last year, highlighting that consumers are broadly pessimistic.
July’s figure reflects more pessimistic sentiment regarding the personal financial situation of consumers over the last 12 months, and the general economic situation over the last 12 months and for the year ahead. Consumers also grew slightly less willing to make major household purchases, although they were slightly more optimistic about their personal financial situation over the next year. With consumer sentiment worsening for the second consecutive month, it appears that there is more to the decline that a simple case of post-election blues. The continuing fall in real wages, which is gnawing away at households’ purchasing power, is likely a crucial factor.
Joe Staton, Head of Market Dynamics at GfK, is downbeat about prospects for the indicator going forward: “All bets must now be on a further drift downwards in confidence. Yes, employment is booming, but wages have fallen in real terms since 2008 once inflation is taken into account. And while consumers have increased borrowing to carry on spending, the household savings ratio is now at a record low. If Brexit negotiations continue to deliver more questions than answers, it’s unlikely the Overall Index Score will find any tailwinds for some time.”
Author: Oliver Reynolds, Economist