Consumer confidence stages end-of-year rally but uncertainty continues

The GfK Consumer Confidence Index demonstrates a positive uplift in consumer confidence – but the impact of the Autumn Statement is yet to be felt.

A present on a wooden desktopConsumer confidence has returned to growth after taking a nose dive last month, according to GfK’s most recent Consumer Confidence Index, but it remains firmly in negative territory.

It comes as the government outlined a series of measures in it Autumn Statement this week to help get the economy “back on track”. Chancellor Jeremy Hunt revealed a bigger than expected cut to the main rate of employee national insurance contributions from 12% to 10%, effective from 6 January 2024. State pensions will also increase by 8.5% from April, while universal credit will rise by 6.7%.

While GfK’s data was collected ahead of the Autumn Statement, it reflects the uncertainty that UK consumers feel about the health of the economy.

The overall index score – a combined measure of consumers’ confidence in their own financial situation and their perception of the state of the economy – rose by six points in November. But while all five measures are up compared to last month it remains at -24.

People’s view of their personal finances over the last year is up three points to -16, while consumers’ forecast of their finances over the next 12 months is up five points to -3, a 26-point rise compared to last year.

GfK confidence barometerWhile things have improved, consumers are still feeling broadly negative about the overall health of the economy. Consumer sentiment about the economic situation over the next 12 months rose by six points to -26, while the measure of the past 12 months increased five points to -49.

Meanwhile, the major purchase index, a measure of how likely consumers are to buy higher value goods and services, is up 10 points to -24.

Joe Staton, client strategy director at GfK, tells Marketing Week: “The trend clearly points to an improving consumer mood, although the underlying numbers are still all negative. But people are still hesitant.

“Although they know that officially inflation has reduced, the cost of living crisis is very real for many and it will be some time before that feeling changes. Headlines celebrating a robust return of consumer confidence are still a long way off.”

He does note, however, that the 10-point jump in the major purchase index is good news for retailers in the run-up to Christmas, particularly after the 14-point fall in the previous month.

GfK major purchases index Nov 2023

Responding to the latest data from GfK, and the impact of consumer confidence in the run-up to Christmas, Linda Ellett, UK head of consumer, retail and leisure for KPMG, says: “Four in 10 consumers that KPMG surveyed said that the higher cost of living will require them to spend less on Christmas gifts this year. Retailers are competing for this shrinking spend, with over a third of consumers telling us they are spending more time now searching for the best priced goods.”

She notes that around Black Friday and Christmas consumers are “watching prices and looking out for genuinely good promotions and discounts”.

Notably, many of the supermarket retailers have doubled down on price and value-based marketing in the run-up to Christmas, suggesting that consumers are prioritising spending as little as possible on full price items.