Despite the outcome of the Brexit referendum remaining unknown, with each day new developments occurring in the House of Commons adding to the ever-increasing uncertainty as to Britain’s supposed departure from the European Union, UK consumer confidence is still steady. Well, what we mean by this, is steadily pessimistic, neither increasing or decreasing in confidence despite growing concerns.
Why consumer confidence is important
Why is consumer confidence considered as being important? It is usually regarded as a fundamental economic indicator, as consumer household spending makes up a staggering two-thirds of the country’s output. The consumer confidence index that was released this month in March by GfK shows that it was at -13 for the current month. That remains unchanged from the month previously, however, it does show that consumer confidence is down 6 points over the entire year. The only times it has been lower has been twice having been in December and January in the period over the last five and a half years.
When it comes to the GfK index, a score of zero will indicate the UK consumers are feeling relatively indifferent about their spending plans and their overall financial circumstances. Since the outcome of the Brexit vote in June 2016, the barometer on consumer confidence turned negative. It has remained like this for around three years in total.
Even though employment is at a record high in the country, and nominal wages have been increasing, consumer confidence has not changed. The index clearly indicates that households in the UK are still very much concerned about the outcome of Brexit and the economy in the next 12 months. Evidently, the lack of clear decision over what will happen to the UK and its relationship with the European Union hangs heavy in UK consumers minds, even if we are experiencing wage growth, a more robust labour market and stable inflation.
Increase in confidence in personal finance
Whilst the consumer confidence picture remains fairly downbeat, there was a small increase in consumer optimism for their personal finances for the next 12 months, as reported in the GfK index. The ‘personal finance situation index’ for 2019 had improved by one point to +2 from the previous year. When you put this in comparison to the general economic situation index for the following year, this was -36.