Following six months of strong recovery over the first half of 2021, UK consumer confidence has taken a turn for the worse as expectations for both the wider economy and personal finances weaken.
The latest Consumer Confidence Barometer from GfK records a four-point reduction in its confidence index score over October, dropping to -17. In fact, all measures are down compared to September.
The figures mark the third consecutive month in which the headline confidence score has dropped, and the second month in a row in which five sub-measures have decreased.
“Right up until the start of the summer, it really did look like consumers were trying hard to put Covid issues behind them,” GfK’s client strategy director Joe Staton tells Marketing Week. At the end of July the market research firm recorded a headline score that was just seven points away from breaking back into positive territory, which hasn’t happened since January 2016.
“But those five months of improvement have clearly been derailed,” he said. “First we see a tiny slip going from July to August, then a bigger fall heading into September, and the trend has now continued into October.”
The most pressing concern revealed by the data is consumers’ weakening confidence in the economy over the coming 12 months, with this measure collapsing by 10 points to a score of -26.
Reflecting on the general economic situation of the UK over the past 12 months, consumer confidence again dipped, down 3 points to -46. However, both these measures mark a significant improvement on October 2020.
In worrying news for British retailing in the build up to Christmas, there has also been a further decline in the intention to make major purchases, as the index for personal finances also takes a hit.
The index measuring changes in personal finances over the past 12 months has dropped a further one point to -5, while the forecast for the next 12 months has decreased four points to 1. Both measures are slightly ahead of October 2020, though only by four points and one point respectively.
As a result, despite the savings index having stayed the same at 22, eight points higher than this time last year, the major purchase index has dropped by four points to -10.
“People don’t like queuing for petrol, they don’t like their utility bills racing upwards and those with mortgages or other debts don’t like the idea of interest rates going up,” Staton explains. “And to top it all, it still doesn’t look like the Covid beast is going to quietly lie down and die.”
“Consumers are nervous about their personal finances, they have turned gloomy about the economy, especially for the next 12 months, and they are shying away from big ticket expenditure. It’s difficult to say where we go from here, but for marketers this is the worst time of year for consumers to be losing their nerve.”