GfK UK consumer confidence rises but stays muted
A lot of news media organisations are trumpeting a “jump” in UK consumer confidence that GfK’s long-running Consumer Confidence Index revealed on Friday. But while sentiment did indeed rise by three points in August, it only rose to -7 so we need to get the so-called leap into perspective.
That said, any increase at a time when the progress of Brexit negotiations still seems to be unclear and retailers across many industry sectors are struggling, has to be good news.
GfK said that four of the scenarios that it measures increased in its August survey, while one stayed the same, which is encouraging after many months that have seen at least one of the five measures falling.
As mentioned, the overall index score went up by three points for August compared to July, and the index for consumers’ personal financial situation over the last 12 months rose by the same amount to reach +4. The personal financial situation over the next 12 months index rose, but only by one point, to reach +8.
But while consumers seem to be fairly upbeat on their personal situations, they seem to be less confident about the state of the country and its economy. Looking at the last 12 months, the economy index rose by two points but only to -26 month-on-month. And looking at the next 12 months, the index stayed flat, also at -26.
Interestingly, the major purchase index went up by a hefty eight points to +6. That compares to -2 last month and zero in August 2017.
But while this would suggest that consumers are more prepared to make big purchases, that's not necessarily good news for the fashion sector. If those big purchases are designer handbags, maybe it would be reason to celebrate, but it’s actually more likely to be a sofa, a central heating system, a car, or a holiday.
The fact that the savings index (which is measured but not included in the overall index score) went up by eight points to reach +17 also suggests that fashion may continue to stay low down the priority list. Consumers are clearly saving, but whether that’s to create a safety net in case of economic problems, or in order to make a big purchase, fashion chains are unlikely to see much of that cash.
So what did GfK have to say about it all? Client Strategy Director Joe Staton said: “Consumers are no doubt aware of the incessant Brexit noise, the core debate about whether ‘no deal is better than a bad deal’, the accompanying threats, warnings and uncertainties, the wild hopes and dark fears, and the daily ups and downs. But are consumers putting their hands over their ears and quietly saying: let’s just wait-and-see?
“We are just months away from the Brexit crunch but there is no sign (yet) of any crash in consumer confidence. Yes, the core index continues to muddle along in negative territory, but Armageddon seems a distant prospect. With this month’s jump to -7, we have four of the constituent scores up and one unchanged. And we are well above the worrying -39 we saw in July 2008.”
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