Consumer confidence shows ‘encouraging’ signs of recovery

Consumer confidence is edging up but with inflation refusing to come down and the Bank of England raising interest rates to a 15-year high of 5% yesterday (22 June) marketers are warned to remain cautious.

The inflation rate was 8.7% in May – as it was in April – stopping the downward trend from its peak of 11.1% last year, with the Office for National Statistics suggesting rising prices for “air travel, recreational and cultural goods and services” are keeping it high.

But despite this consumers are becoming slightly more positive in their outlook, according to the latest Consumer Confidence Barometer from GfK.

The overall index score improved by three points in June, taking it up to -24, which although still in negative territory is a marked improvement on the -41 recorded in June 2022.

The biggest improvement was seen in people’s view of their personal financial situation over the coming year, which increased by seven points to -1. This marks the third consecutive month of improvement and means it is just shy of returning to a positive position, something not seen since December 2021. It is also a 27-point increase compared to June last year.

Consumers’ feelings about their own finances over the past 2 months has also improved, up five points to -15.

Looking at the wider economy, there has been a five-point increase in people’s outlook for it next year, taking it to -25. Again this is a significant uptick compared to 2022 when the figure stood at -57. People’s view of the economy over the past 12 months remains static at -54.

But while there has been some positive steps forward, Joe Staton, client strategy director at GfK, says marketers must “exercise caution”.

“Beware of falling into the trap of concluding consumers see the light at the end of the tunnel,” he tells Marketing Week. “Inflation isn’t yielding yet and we have all the ingredients for more severe economic turbulence, which means it could all get far worse.”

To navigate the rocky road ahead, he suggests marketers must continue to “deliver on brand promise and offer value for money”. “The best marketing will show it understands how the average consumer is fighting to adjust to the cost of living crisis. Even the most loyal customers might be tempted to change brands if there’s a financial rationale for doing so. And those brand switches could be permanent.”Most consumers less loyal to brands as cost of living crisis increases bargain hunting

The major purchase index, the final measure to make up the overall index score, which looks at people’s intention to buy big ticket items, is the only figure to drop. It falls one point to -25, but is again an improvement on June 2022 when it stood at -35.

“Consumers are showing remarkable resilience in the face of inflation that is currently refusing to yield. This is the best showing for the overall index score for the past 17 months and, if consumers continue to weather the current economic storm, then this will provide a firm foundation for getting back to growth,” adds Staton.