MNI 5 Things: Gfk UK Sentiment Likely to Remain In Doldrums

--Analysts See Modest Fall in Consumer Sentiment

--Data due Friday April 26 0001BST

By Jai Lakhani

     LONDON (MNI) - The UK Gfk monthly consumer sentiment data is seen very

modestly lower, the latest MNI survey of analysts suggests. Expectations,

calculated from a range of analyst forecasts, suggests consumer sentiment will

remain fairly flat on the previous month's reading, dropping to -7.5 from

March's value of -7.

                Apr Gfk Consumer Sentiment

------------------------------------------

MNI Median                            -7.5

Prior (March)                           -7

     The previous month was viewed as a bright spot for UK consumer sentiment

after the Gfk indicator rose from -10 to -7. However, the -7 figure should not

be heralded as a drastic increase in consumer confidence but rather that

consumers found solace from positive data releases such as real wages at

non-negative levels for the first time in nine months. However, this was still

not enough to make a feasible difference in confidence levels. 

     --Analysts under-estimate consumer sentiment

     Analysts have, over the last twenty months, tended to under-estimate

consumer sentiment by an average index value of 0.75. Only five out of twenty

months have analysts over-estimated consumer sentiment suggesting there is a

slight negative bias on analyst estimates. Were this to hold true for April,

taking the average miss would suggest an actual consumer sentiment number of -7

(i.e. unchanged from March). 

     --Savings rise at major purchases' expense 

     Looking at saving intentions over the next twelve months and comparing this

with major purchases over the same period further supports the notion that there

has been a recent uptick in savings intentions, corresponding to a downturn in

major purchases. Saving intentions 'over the next 12 months' have been

illustrating a downward trend since the peak of July 2016 until December 2017,

but the last three months have seen a modest reversal. March's index value of

19.6 is the highest number since said peak. 

     --March Gfk illustrated saving sentiment

     The Gfk consumer confidence measures in March illustrated the argument that

consumer savings were on the up. March 2018 compared to March 2017 was up from a

-1 index reading to a staggering 13. This was also combined with major purchases

down from 6 to 2 over the same time period. This could mean that despite

consumers viewing their personal financial situation over the next twelve months

as significantly better compared to this time last year, savings are more than

likely to be replenished before major purchases are considered. 

     --GDP leads Consumer Sentiment 

     What seems to be apparent, and not surprisingly so, is that GDP leads

consumer sentiment. GDP has shown a slight downward trend since March and median

analyst estimates have pencilled in a y/y growth rate of 1.3% in the 1Q18

results, down from 4Q17 which had a y/y growth rate of 1.4%. This could mean

that consumer sentiment is set to edge lower after a slight recovery in March. 

     -- Consumers more courageous when they feel optimistic

     One of the reasons that Friday's Gfk consumer sentiment holds importance is

to see if the recent pick-up continues and if this has an impact on the uptick

in real wage growth. In the past, consumer sentiment has led real wages. This

could be explained by the fact that as consumers feels more optimistic about the

future, they are more likely to ask their current employers for a pay-rise or

try to find employment elsewhere where they can get a higher remuneration

packet. The theme has been noted by Bank of England Monetary Policy Committee

(MPC) member Michael Saunders. 

     Based on the increase in savings intentions which has been combined with a

reduction in major purchases intentions and an anticipated lacklustre 1Q18 GDP

growth, the Gfk consumer sentiment may stagnate in April or move back down after

its sustained upward trend since November 2017. 

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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