Consumer confidence in the UK has once again taken a hit in January, according to the Consumer Confidence Index. The index revealed a drop of three points, bringing the reading to -45, which is near-historic lows. This decline adds to the overall pessimism surrounding the retail industry’s prospects for the year ahead.
The latest data from the index shows that four measures have fallen compared to December, while one has risen. The index measuring changes in personal finances over the last 12 months fell by three points to -31, significantly lower than January 2022 by 25 points. However, there was a slight increase in the forecast for personal finances over the next 12 months, reaching -27. Nevertheless, it still remains 25 points lower than the previous year.
The measure for the general economic situation of the country over the last 12 months dropped by five points to -71, showing a decrease of 24 points compared to January 2022. Meanwhile, expectations for the coming 12 months declined by one point to -54, down 22 points from last January.
Both the Major Purchase Index and the Savings Index saw significant declines. The Major Purchase Index fell by six points to -40, marking a 30-point decrease from the same month last year. On the other hand, the Savings Index dropped by six points to +14, just one point lower than the previous year. This suggests that consumers are more inclined to save money rather than make big purchases. It remains to be seen if this trend will affect smaller indulgences such as fashion and beauty purchases during this challenging period for the retail industry.
Joe Staton, Client Strategy Director at GfK, states that consumers are facing an economic “New Year hangover” characterized by high levels of pessimism about the state of the wider economy. Unlike a conventional hangover, this economic hangover is expected to persist. With inflation eating into wage increases and the possibility of high energy bills in the near future, consumer confidence for this year does not look promising. It is clear that 2023 will present significant challenges for the economy.
Useful links:
1. Savings ratio data from the Office for National Statistics
2. Market data for the FTSE 100
