End-of-year rally in consumer confidence persists amid ongoing uncertainty
Consumer confidence rises as GfK index shows positive uplift, yet uncertainty looms amid anticipation of Autumn Statement impact
The latest GfK Consumer Confidence Index shows that consumer confidence has rebounded from a significant drop last month, although it still remains in negative territory.
This comes as the government unveiled a series of measures in its Autumn Statement this week aimed at reviving the economy. Chancellor Jeremy Hunt announced a larger than anticipated reduction in the main rate of employee national insurance contributions from 12% to 10%, effective from 6 January 2024. Additionally, state pensions will see an 8.5% increase from April, while universal credit will receive a 6.7% boost.
GfK's data, collected prior to the Autumn Statement, indicates the apprehension UK consumers have regarding the economy's well-being.
In November, the overall index score, which measures consumer confidence in their personal financial situation and their view of the economy, increased by six points. Even though all five measures improved compared to the previous month, the score still stands at -24.
People's assessment of their personal finances over the previous year has increased by three points to -16, while the forecast for their finances over the next 12 months has risen by five points to -3, marking a 26-point increase compared to last year.
Despite these improvements, consumers still hold a generally negative view of the overall state of the economy. Consumer sentiment regarding the economic outlook for the next 12 months has risen by six points to -26, while the assessment of the past 12 months has increased by five points to -49.
Meanwhile, the major purchase index, which measures consumers' likelihood to purchase higher value goods and services, has increased by 10 points to -24.
According to Joe Staton, client strategy director at GfK, "The trend indicates a positive shift in consumer sentiment, although the underlying figures remain in the negative. However, there is still a lingering hesitation among people."
Even though official reports show a decrease in inflation, the struggle of high cost of living is a harsh reality for many and it will take a while for that perception to shift. The headlines rejoicing a strong resurgence of consumer confidence are still a distant prospect. On a positive note, the 10-point increase in the major purchase index is encouraging news for retailers as Christmas approaches, especially following the 14-point decline in the previous month.
Linda Ellett, the UK head of consumer, retail, and leisure for KPMG, responded to the latest data from GfK and the impact of consumer confidence in the run-up to Christmas. She noted that four in 10 consumers surveyed by KPMG stated that the higher cost of living would force them to reduce their spending on Christmas gifts this year. Additionally, over a third of consumers mentioned that they are now spending more time searching for the best priced goods as retailers compete for their shrinking spend.
During Black Friday and Christmas, consumers are vigilant about prices and seek out authentic deals and discounts. It is evident that several supermarket retailers have intensified their focus on price and value-based marketing as Christmas approaches, indicating that consumers are emphasizing the importance of spending as little as possible on full price items.
