Survey shows rise in UK consumer confidence

UK consumer confidence rose in January but remained in negative territory, market research firm GfK said on Tuesday.

The monthly consumer confidence index showed a reading of -5 in the first month of 2017, up from -7 in December 2016. Overall, three of the five measures that make up the index increased in January, one was unchanged and the other decreased.

The measure that fell was the major purchase index, showing that shoppers were less willing to spend money on big purchases. This suggests that consumers might be starting to scale back spending as prices go up following the Brexit vote.

Commenting on the survey, Joe Staton, head of market dynamics at GfK, said that “Brexit jitters” and a “wobbly pound” pushing up prices were among the factors keeping consumer confidence down this month.

“Although consumers report that they are feeling upbeat about their personal financial situation for the coming year (four-point increase to +7), stubborn concerns about the wider economy looking back 12 months (-24 points) and ahead 12 months (-23 points) are ensuring the overall index score remains stuck in gloomy territory,” Staton explained.

Meanwhile, the decline in the major purchase index could be a foretaste of slowing consumer spending throughout 2017.

“Rising inflation and weak income growth is forecast to squeeze households’ disposable income, and these two factors could conspire to depress confidence for the year ahead,” Staton said. “It’s certainly difficult to see where the oomph will come from over the short term.”

GfK’s survey followed a more positive view of UK consumer confidence seen in Deloitte’s Consumer Tracker report. The quarterly survey, released on Monday, found that although overall consumer confidence in the fourth quarter of 2016 fell slightly, by one percentage point from the previous quarter (-5% to -6%), it remained higher than during the same period in 2015.

Five out of the six confidence measures showed positive year-on-year growth, with only confidence on disposable income falling in the fourth quarter, the business advisory firm said.

“So far, Brexit has not dented consumers’ confidence about the outlook for jobs, particularly among younger workers,” commented Ian Stewart, chief economist at Deloitte. “Rising real wages, credit growth, high employment and rather more positive business confidence have bolstered consumer spirits and have kept consumer confidence levels stable, and higher than 12 months previously.”

However, Stewart also warned that the new year brings “headwinds” that may challenge the UK’s current consumer-friendly economic conditions.

“Falling confidence about disposable income may be a sign that we are seeing the start of a squeeze on household incomes,” he said. “Rising inflation, largely driven by the weakening pound in recent months, will also put pressure on real incomes and consumer spending in 2017.”