MNI INTERVIEW: Mixed Messages In Feb From UK Consumer - GfK
Higher real incomes a help for UK consumers, but headwinds still hold back a quicker recovery in sentiment.
There are still headwinds holding back the UK consumer but the outlook for personal finances over the coming year remains a relative positive, the head of a leading consumer sentiment survey told MNI.
"Higher real disposable incomes as inflation slows is certainly helping the consumer feel a little better about their own financial outlook, but the latest survey offers both good and bad news in February," Joe Staton, Client Strategy Director GfK, said in an interview. (see MNI INTERVIEW: Bright Spots In UK Growth Outlook-ONS's Fitzner)
"The improvement in the Overall Index Score seen over recent months stalled in February due to a fall across most measures, which is the bad news," Staton said, after the main Index dipped to -21 from -19 in January.
GOOD NEWS
Highlighting the "good news" of an unchanged personal financial situation for the next 12 months -- Staton's favourite pointer to future confidence levels -- he noted it was the one index measure not to have slipped this month.
"This metric is key to understanding the financial mood of the nation because confident householders are more likely to spend despite the cost-of-living crisis," he said.
The index measuring changes in personal finances during the last year was down two points at -14; still 12 points better than February 2023, while the forecast for personal finances over the next 12 months was unchanged at 0 --18 points higher than this time last year.
HEADWINDS
However, consumers remain concerned by higher expected council tax bills, rapidly rising insurance costs and the prospect for many of higher mortgage payments as fixed-term deals are rearranged, which could quickly eat in to any disposable income surpluses.
News the UK had fallen into a technical recession late in 2023 had no impact on the reading, as the latest GDP data was published after the survey closed, Staton said.
Looking forward, he said it will be interesting to see what the forthcoming Budget delivers in terms of taxation and inflation. "These are important issues to everyone – especially in an election year".
"The recent performance of the economy will play a crucial role in determining results at the ballot box. All the measures this February are better than a year ago, but consumer confidence alone will not carry us into a brighter economic future,” he said.