According to a recent report by market research institute Gfk, consumer confidence in the UK remained steady in June, indicating a positive outlook for personal finances. However, concerns about inflation are starting to raise doubts about the future state of the economy. The report highlights that forecasts of increasing retail price inflation could quickly erode consumer confidence, as reflected in a six-point decline in the measure for the wider economy in the coming year.
Despite these concerns, GfK’s Consumer Confidence Index, which has been subject to turbulent fluctuations over the past 16 months due to the Covid-19 pandemic, remained unchanged at -9 in June. The index comprises several measures, with four of them showing improvement compared to May, while one measure experienced a decline.
One notable improvement was seen in the index tracking changes in personal finances over the past year, which rose by four points to 0. This indicates a significant improvement of nine points compared to June 2020. Additionally, the forecast for personal finances over the next 12 months increased by one point to +11, surpassing last year’s figures and highlighting a positive outlook.
On the other hand, the measure for the general economic situation of the country during the past 12 months rose by one point to -47, a notable increase of 12 points from last June. Expectations for the general economic situation over the next 12 months declined by six points to -2, but still remained 46 points higher than a year ago.
Another positive finding from the report is the two-point increase in the Major Purchase Index, reaching -5 this month. This suggests that consumers are more willing to make significant purchases, and the index stands at 27 points higher than last year. This rise in the index provides encouraging news for retailers.
The Savings Index saw a slight decline of one point to +21 in June, but it remains five points higher than this time last year. This indicates that consumers are still committed to saving despite the overall positive outlook.
Joe Staton, GfK’s client strategy director, emphasized the positive aspects of the report, particularly the strong numbers for personal financial situations both in the past year and the year to come. He also highlighted the further improvement in the Major Purchase Index, which suggests that shoppers may be spending in anticipation of a staycation summer.
Consumer confidence is a critical factor in driving economic growth as the UK recovers from the pandemic. Although the stability of consumer confidence is a positive sign, the potential risk of inflation looms large. The impact of rising retail prices on consumer sentiment and spending behavior should be closely monitored in the coming months. Retailers and businesses must be prepared to adapt their strategies to maintain consumer trust and meet evolving demands in this uncertain environment.
Useful links:
1. BBC: UK Consumer Confidence Holds Steady in June
2. The Guardian: Concerns About Inflation Cast Doubt on UK Consumer Confidence
