Household confidence levels about their personal finances is in more positive territory, that’s according to the latest GfK consumer confidence index. Given that Brexit uncertainty continues to weigh on consumer confidence, this data provides consolation for landlords, in that tenants’ rent paying ability remains stable.
The international consulting and forecasting organisation, Growth from Knowledge (GfK), produces a regular consumer confidence index which shows a rise from -13 to -10 in when the results to May were published. This shows the first index figure rise since February, but though this is a hopeful sign, the index is still stuck in negative territory, as it has been since 2016.
Consumer sentiment, as GfK says, is a critical barometer of economic output as around 66% (two-thirds) of GDP depends on consumer spending. Britain is a service based economy, so when consumer confidence levels trend downwards, this considerably dampens the Britain’s overall economic demand, having a negative impact on economic growth.
Joe Staton, Client Strategy Director at GfK, has said:
“Consumer confidence has held steady this month [May 2019] at minus -13, despite political chaos and ensuing uncertainty as we try to find our rightful place within Europe. Against a backdrop of stable inflation and a robust labour market, where wages continue to grow more quickly than prices, confidence has remained negative but fairly stable since the Referendum.
“However, while UK consumers report a small increase in optimism for their personal financial situation for the coming year, the index is being dragged down by our nagging fears for the general economy. Things might change when people feel the current crisis has passed but what sort of resolution can consumers reasonably contemplate just now? Or are consumers rightly sensing a bumpier economic climate for post-Brexit Britain?”
The GFK consumer confidence index is commissioned by the European (EU) Commission and is considered to be a key economic indicator; it is also respected and monitored closely by the Bank of England.
When households are feeling less pessimistic across almost all categories, as this latest survey indicates, people on balance feel that Britain’s economic fortunes will improve in the coming year, a conclusion which is five points higher than the previous month’s result.
That consumers are adjusting to the Brexit deadlock situation, responding positively to higher wages and low unemployment has also been acknowledged by the Centre for Economics and Business Research. Its own consumer confidence index for May, hit a year-long high.
Business confidence, on the other hand, has been going in the other direction, with Lloyds Banking Group’s monthly business barometer showing overall business confidence falling for the first time over the last 3 months.