Consumers show ‘worrying enthusiasm for spending’ as Christmas approaches
While this might sound like good news for retailers, GfK warns that the trend is more “worrying than reassuring” as pressure on consumer spending grows.
With Christmas less than two months away, the latest consumer confidence figures from GfK show Brits are upping their spend on big ticket items.
In October, the major purchase index rose two points to a score of three – marking the third month of rises. However, marketers should stray away from looking at this as evidence of a healthy economy, according to Joe Staton, head of market dynamics at GfK.
He warns: “Our enthusiasm for spending, as witnessed by the uptick in the major purchase index, is more worrying than reassuring. Surging credit card use is fueling spending at the expense of our appetite for saving, which is growing at the slowest rate since the start of the 2008/2009 financial crisis.”
This month, the overall consumer confidence index fell one point to -10 – eight points lower than the same period a year ago. And despite positive movement in September, the measure around the public’s perception of the general economic situation over the last 12 months (-29) and over the next 12 months (-26) fell by one and two points respectively.
It was better news on the personal finances front. Consumer perceptions of their personal finances over the last 12 months rose one point to a score of 0, with expectations for personal finances over the next 12 months holding flat. However, Staton says this small rise is ultimately “counter-intuitive.”
“This tiny shift, which is up a single point, in how we view our personal finances over the past year is counter-intuitive given rising living costs, an imminent interest rate rise, and the reality that we earn less in real terms in 2017 than in early 2006,” he explains.
Looking forward, Staton expects any Christmas momentum to ultimately be short-lived. He concludes: “Interest rates are turning, inflation is strengthening, there’s Brexit fog, burgeoning credit card use, no motivation to save – so is there a precipice ahead?
“We are now entering the crucial Christmas trading season and it will be a testing time for retailers and consumers alike. Will consumers carry-on shopping or start to cut-back in the face of mounting pressure on our pockets?”
Watch this space.