UK consumer confidence has achieved a significant milestone by exceeding its pre-lockdown score from March 2020 by two points in July, according to GfK’s Consumer Confidence Index. Despite still being in negative territory at -7, the index has shown consistent improvement or stability for six consecutive months.
One notable highlight is the positive outlook for personal finances in the next 12 months. GfK’s Client Strategy director, Joe Staton, pointed out a “dramatic jump” in the major purchase sub-measure, indicating that consumers believe it is the right time to make big-ticket purchases.
The July index revealed that two measures saw an increase compared to the previous month, two decreased, and one remained unchanged. The Major Purchase Index saw a significant seven-point increase to +2, reflecting a substantial 28-point improvement compared to the same month last year. This rise can be attributed to the gradual reopening of the UK high street and the release of pent-up demand as Britons return to shopping, dining, and entertainment venues.
Although the measure for changes in personal finances over the past 12 months decreased slightly by one point to -1, it remained three points higher than in July 2020. The forecast for personal finances over the next 12 months remained steady at +11, indicating an 11-point improvement compared to the previous year.
Regarding the general economic situation, the index for the past 12 months increased by four points month-on-month, reaching -43, which signifies an 18-point improvement compared to July 2020. However, expectations for the general economic situation over the next 12 months declined by three points to -5 compared to June, although still significantly higher than a year ago by 36 points.
The Savings Index experienced a minor drop of one point in July, settling at +20. This figure, while one point lower than the previous year, still reflects a positive sentiment towards saving.
Despite these positive developments, Staton warned of potential factors that could impede the ongoing recovery. These threats include rising consumer price inflation, the emergence of Covid variants, increasing infection figures, the anticipated end of the furlough scheme, and the Job Retention Scheme. These external factors have already influenced consumer sentiment, leading to a decrease in confidence regarding the general economy in the future.
Staton emphasized the significance of the remaining summer months in shaping consumer confidence for the rest of 2021 and beyond. The outcome of these challenges will determine whether the rebound in consumer confidence can be sustained.
Useful links:
1. GfK
2. Bank of England
