Brits ‘less afraid of Brexit’ as consumer confidence bounces back

British consumers showed a renewed hunger to make big purchases in August as Brexit fears started to ease.

British consumers’ propensity to make major purchases rose nine points in August to +7, according to GfK’s latest consumer confidence index. Although this is 10 points lower than in August 2015, it represents a major improvement on July’s score of -2.

The core consumer confidence index also increased by five points to hit -7 as positive growth was recorded across all the major measures.

Joe Staton, head of market dynamics at GfK, says the figures are a “stark contrast” from July, when consumer confidence saw its biggest drop in 26 years. He says August’s figures prove Brexit fears are easing and that the public is thinking more rationally.

“The public is now thinking more rationally after a period of such dramatic uncertainty,” he says. “Yes, Brexit fears will continue but people have calmed down quite a bit.”

The index measuring consumers’ feelings towards their personal finances over the next 12 months rose five points in August to 4; this is only two points lower than August 2015. And this could be good news for brands.

gfk“What stands out is the pronounced reluctance this month to save. Normally at a time of uncertainty, consumers say they will save more and spend less,” adds Staton.

“But we currently see the reverse. There’s a real fall in the motivation to save, and a clear appetite for major purchases – prompted by our record low interest rates and our high employment rate.”

Waves of encouragement

In July, retail sales jumped by 1.4% month-on-month, according to the Office for National Statistics, smashing expectations of meager 0.1% to 0.2% rise. If you strip out fuel sales, retail sales were 1.5% higher. And on an annual basis, retail sales were almost 6% higher than in July 2015.

Sterling has also strengthened over recent weeks, with fears of a Brexit-induced recession fading away.

Staton says this positive backdrop is “partially” reflective of positive national sentiment following major events such as the Olympics and the start of the Premier League season.

However, he believes the current wave of positive figures is much more than just a “feel good factor.”

He concludes: “When Brexit happened, people were terrified. There still is fear but not that doomsday sort of fear and the consumer confidence index is now a lot more reflective of the economic realities than what we’ve seen over recent months.”

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