‘Bewildering clash’ of politics and economics keeps consumer confidence rock bottom
Consumer confidence remains close to last month’s historic low as a combination of rising prices and political unrest take their toll.
Consumer confidence remains “severely depressed” as inflation, looming tax rises and rising food and energy costs continue to rock the nation.
The latest GfK Consumer Confidence Barometer shows an overall index score of -47, just two point above last month’s historic low of -49.
While three of the five measures that make up the overall index score increased in October, all remain deep in negative territory.
People’s view of their personal financial situation over the next 12 months increased by six points to -34, but this is considerably lower than the score of 1 recorded last year, and illustrates the pressure consumers are expecting to feel in the coming year.
Consumers’ view of their finances over the past year is also well below this time in 2021 (-5), but remains at the same level as last month on -28.
While the measures for people’s view on the general economic situation over the previous and coming 12 months improved marginally, both scores remain deeply negative. Consumers’ view of the economy over the past 12 months increased three points to -69, while their expectations for the next year increased by seven points to -61. Both figures are far more depressed than in October 2021 when the scores were -46 and -26, respectively.
“It’s difficult to think of a time when the economy and individual financial prospects were more volatile,” GfK’s client strategy director, Joe Staton, tells Marketing Week. “Consumers look out of their windows and see a bewildering clash of politics and economics that is directly impacting their financial security and wellbeing.”
He adds that while things are “messy now” the UK government “still must tackle a demanding set of problems so further bad news cannot be ruled out”.
The only measure to drop further in October is the major purchase index, which falls a further three points to -41. It continues a steep downward trend that began in July 2021 and will be “especially worrying” for brands as the final quarter of the year plays out, as it is usually a time businesses expect to strengthen their balance sheets, says Staton.
However, he believes the “biggest danger by far” is inflation, which is now rising at its fastest rate for 40 years.
“Households are not just running scared of burgeoning energy and food prices, and the prospect of further base rate rises increasing mortgage costs. They are now facing the likelihood of tax rises and even austerity measures,” he says.
“For ordinary consumers, this web of uncertainty and turmoil amounts to a ‘new abnormal’. The negative environment will deflate future spending plans, and cautious consumers could easily slow the UK economy still further. Consumers, like governments, are just as capable of U-turns, and today’s economic headwinds indicate a long hard winter.”
Depressingly, he suggests there is “not much” that will lift consumers’ mood in the months ahead as the “conditions for breathing life back into consumer confidence are just not there”.
“Against that background, marketers must work even harder to protect brands in these challenging economic conditions,” he advises. “Now really is the time for marketing to demonstrate its true value to maintaining and building value through innovative approaches that empathise with the consumer of today.”