Confident consumers shrug off election fears
CONSUMERS have reported an “unexpected uptick” in confidence in defiance of a predicted pre-election and post-Brexit slump.
The closely watched GfK Consumer Confidence Index increased two points in May to minus five, despite inflation dealing a blow to household spending and wages rising at a slower pace than inflation for the first time in two and a half years.
Joe Staton, head of market dynamics at GfK, said: “We have an unexpected uptick in the barometer this month as consumers report increased confidence in their personal financial situation, the wider economy, and future plans for shopping and saving.
“Despite life becoming more expensive with inflation hitting its highest level in four years and wages dropping in real terms for the first time in three years, stagnant living standards haven’t yet significantly dented consumers’ spirits - when it comes to retail therapy we remain happy to splash the cash as sales jump ahead of expectations.”
The measure of consumers’ changes in personal finances over the last year increased by one point, while the forecast for the next year is up two points on last month.
The measure for the general economic situation of the country during the last 12 months has increased three points to minus 20; seven points lower than May 2016.
Shoppers sent the measure of the general economic situation over the last 12 months up three points to minus 20, while the figures show a two point increase in the major purchase index to positive nine - the same as this time last year and an indication of consumer confidence in buying big ticket items.
Mr Staton added: “Although the overall index score is bumping along in negative territory, we haven’t seen any significant fall of the kind we might expect during such periods of pre-election and pre-Brexit uncertainty.
“Perhaps the real squeeze in living standards is yet to hit home. After years of people paying off debts postdownturn, unsecured borrowing has steadily increased since 2014 reaching record highs this month.
“When will we get our comeuppance and realise we have to pay the piper?”
The index follows the most recent Office for National Statistics (ONS) retail figures showing sales outstripping expectations to rise by 2.3% in April compared with the month before.
British Retail Consortium chief executive Helen Dickinson said: “With shorter stock turnaround times, the impact of the weaker pound has already started feeding through into food prices, although food price inflation this month is still well below the input cost price increases being faced by retailers.
“By contrast, heavy discounting in the wake of a weak start to the year and the fact that some businesses are still protected by hedging contracts are keeping non-food prices deflationary for now.
“Nevertheless, we expect the general trend of inflation to be upwards over the course of the year, which will squeeze disposable income at a time when wage growth is slowing.”
Mike Watkins, head of retailer and business insight at Nielsen, said: “Consumer expenditure on food and drink has held up well so far this year with shoppers visiting supermarkets more often to seek out savings and to find the best value for money, strategies which are helping shoppers to manage changes in their household budget.”