Consumer confidence has slumped to levels not seen since the Brexit referendum a year ago as uncertainty and an economic slowdown hit spending.
The latest figures from GfK show its main consumer confidence metric fell to a disappointing -12 in July, a two-point fall from June. In fact, for the second month in a row, all six of the main measures experienced a decline as Brits continue to be confused by the state of their economy.
Consumer perceptions of personal finances over the last 12 months fell one point to -2. The major purchase index, meanwhile, fell two points to -2, this is only one point higher than July 2016.
Perceptions of the economy look particularly worrying. The measure for perceptions of the general economic situation over the last 12 months fell six points to -31 in July. And expectations for the general economic situation over the next 12 months don’t look too much better either; this score fell five points to -28.
Speaking to Marketing Week, GfK’s head of market dynamics Joe Staton says the UK economy remains “confusing for consumers”.
He explains: “The UK economy is confusing. On the one hand, employment is strong, but on the other hand, wages have dropped in real terms since 2008 after taking inflation into account. This is naturally eroding consumer confidence when it comes to our finances.
“Equally confusing is how retail sales remain robust even in the face of rising prices. Over the past year, consumers have even increased borrowing to sustain their spending. These kinds of uncertainty are reflected in the overall Index score for July, which has slid by two more points to match the worrying level of -12 we saw in the month following the 2016 Brexit vote.”
The GfK figures (see above) are in line with recent GDP figures from the Office of National Statistics, which showed anaemic Q2 growth of just 0.3%. It said the pound’s weakness following the UK’s vote to leave the EU last June – and the subsequent jump in consumer prices as businesses’ costs rise – had caused a “notable slowdown” in the economy.
IHS Markit’s monthly Household Finance Index also fell to 41.8 in July, its lowest level in three years and down from 43.7 in June. It said UK households were cutting down on big purchases such as cars, holidays and household appliances.
GfK’s Joe Staton concludes: “Are people slowly putting money aside in the expectation of future troubles? One thing is for sure, news from the Brexit negotiations is unlikely to inject any optimism for the foreseeable future.”