Consumer confidence hits decade low, hitting hopes of an economic recovery
Despite the easing of some lockdown restrictions, consumers remain very wary about an economic recovery and are still proving reluctant to spend.
Consumer confidence hit an almost record low at the end of May as the easing of lockdown in the UK failed to filter through to consumers’ outlook.
GfK’s consumer confidence index dropped to -36 between 20 and 26 May, the lowest it has been during the pandemic and just three points ahead of the record low of -39 in July 2008. GfK usually produces its consumer confidence measure once a month, but has been updating it fortnightly during the Covid-19 pandemic with a series of ‘flash’ reports.
This latest flash report – the third so far – shows the overall index score falling by two points compared to May and three points since its last flash report at the start of that month. Four of the five measures of consumer confidence have taken a hit since the last survey despite the UK government relaxing lockdown rules and some businesses such as fast food chains and estate agents reopening.
People’s perceptions of their personal financial situation over the next 12 months fell by one point compared to two weeks ago to -10 and is down 15 points compared to May 2019. Perceptions of their personal situation over the past 12 months fell to -10 as well, down from -4 in May this year and three in May 2019.
It is a similar story for the economy, with consumers feeling that the general economic situation is getting worse. The measure for the past 12 months is down five points to -60 compared to the previous month and down a huge 30 points compared to May 2019. For the next 12 months, the measure is sat at -57.
GfK’s client strategy director, Joe Staton, says: “Against a backdrop of falling house prices, soaring jobless claims, and with no sign of a rapid V-shaped bounce-back on the cards, consumers remain pessimistic about the state of their finances and the wider economic picture for the year to come.”
The major purchase index shows signs of recovery, rising six points compared to May to -41. But this is still well into negative territory and far below the score of one posted in May 2019. Data from consultancy firm Fable Data, cited by the Financial Times, shows household spending was 18.5% lower in the final week of May than in the equivalent week in 2019
“As the lockdown eases, it will be interesting to see just how the consumer appetite for spending returns in a world of socially-distanced shopping and the seismic shift to online retailing – alongside worries of a fresh spike in Covid-19 cases as relaxations increase,” says Staton.
Under current government plans, non-essential retailers will be allowed to reopen from 15 June. But shopping is likely to look very different to pre-Covid-19 with retailers prioritising staff and shopper safety through measures such as two-metre distancing and face masks. Nevertheless, getting consumers back to spending is of strategic important to the UK economy.
“When brick and mortar shopping does get back into gear, safety of staff and of the public will be of paramount importance. Getting consumers into the stores has a strategic role because it can kickstart the economy, especially in terms of jobs, and help to restore some equilibrium to what we earn and how we spend,” adds Staton.