UK consumer points to improvement in personal financial situation in months ahead, but overall outlook flatlines.
“This is encouraging because it’s the first positive and the highest score since December 2021 for consumer’s personal situation,” Joe Staton Client Strategy director at GfK said in an interview.
According to Staton, who looks at the future personal finance indicator as a key guide to future overall confidence levels, the pick-up is “welcome news given the challenges faced by Britons of fiscal drag, higher costs for fuel, rising council taxes and utilities eroding any increases in wages or other income”. (See MNI INTERVIEW: Boost To UK Consumer As Inflation Slows-ONS)
Consumers are still concerned about the economy. Having enough money to pay their bills remains their number one concern, even as inflation slows. Inflation remains a second main concern alongside the health service.
However, Staton is concerned that overall confidence gains have slowed in recent months.
“Look back over much of the last year and it’s clear there were improvements in consumer confidence. But now, the gains seen most months since January 2023 have vanished,” he said.
HEADWINDS
Consumers appear less inclined to complete a big-ticket purchase, with the GfK Major Purchase Index falling a further two points in March, he noted. He also highlighted a fall in consumers’ view of the wider economy over the past year and that the Savings Index dived four points in March.
Interest rate cuts have yet to materialise and given the nature of fixed-rate mortgages, it could take some time for the benefit of any future cuts to boost confidence, he said. (See MNI BOE WATCH: MPC On Hold As Hawks Fold But Fractures Remain)
“As summer approaches, the big question is whether or not we are on a temporary pause or are consumers about to press reverse?,” Staton asks.
At the moment, he isn’t sure of the answer, as there are still known unknowns to face, including energy costs and council tax bills in coming months. But either way, he said it is too early to call the “green shoots of recovery”.
