Consumer confidence sees biggest drop in 26 years

Consumers are turning their backs on making big purchases as confidence takes a hit following the vote to leave the EU.

Woman legs and shopping bags holding in hands.

British consumers’ propensity to make major purchases fell 11 points in July to -2, as purse strings continue to tighten post-Brexit. And the major purchase index is now 13 points lower than July 2015, according to GfK’s latest consumer confidence index.

The core consumer confidence index fell 11 points in July from -1 to -12, marking the sharpest monthly decline since March 1990. This decline marks a further 3 point drop from the -9 recorded by GfK’s Brexit Special Index earlier this month.

“Consumers in post-Brexit Britain are reporting higher levels of concern this month,” says Joe Staton, head of market dynamics at GfK. “We have seen a very significant drop in confidence, as is clear from the fall in each of our key measures, with the biggest decrease occurring in the outlook for the general economic situation in the next 12 months (-19 points).”

Consumer confidence fell in July after the Brexit vote
Consumer confidence fell in July after the Brexit vote

All five measures used to calculate the Index saw decreases in July. The index measuring consumers’ feelings towards their personal finances over the last 12 months fell by seven points this month to -1; a score five points lower than July 2015.

The forecast for personal finances over the next 12 months, meanwhile, is down by nine points this month to -1; a score seven points lower than this time last year.

Perceptions of the general economy during the last 12 months also dropped 12 points this month to -25, while expectations for the economy over the next 12 months fell a whopping 19 points to -33; a considerable 32 points lower than July 2015.

However, despite the negative numbers, Staton says marketers should keep calm as things could balance out.

“Consumers are clearly coming to terms with the new reality that arises out of the UK’s Brexit decision.”

Joe Staton, head of market dynamics, GfK

“But we need to maintain a sense of perspective because the Index continues to remain at a relatively elevated level. Yes, today’s Index Score is -12 but we have seen several extended periods since 1974 when the core Index Score has been much lower, recording levels below -20 and -30 and touching an all-time low of -39 in July 2008.”

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