Consumer Confidence in UK Falls to Lowest Level Since Brexit Referendum Result

Jonathan Billinger [CC BY-SA 2.0] via Wikimedia Commons

This month, consumer confidence in the United Kingdom has dropped again, hitting its lowest level since the result of the Brexit vote in June 2016 and emphasising the fragility of the household sector as a driver of the growth of GDP.

In November, the GfK Index was at -12, down from the -10 result in October.

There was a huge drop in the index in the immediate wake of the Brexit referendum. However, it recovered quickly as the political scene was stabilised.

However, the index has been broadly declining since September 2016, as inflation, that is caused by the record drop in sterling on the night of the Brexit vote, has eaten into real wages.

The head of market dynamics at GfK, Joe Staton, stated: “The confidence trajectory is unquestionably negative and sadly no amount of tinsel or baubles will change it. We need some big, positive economic good tidings to reverse this downward trend.”

All five of the measures that comprise the headline index dropped in the month, with the highest decline coming from the “major purchase index.”

Earlier this month, a separate consumer confidence index that was produced by the Centre for Economics and Business Research and YouGov dropped to 106.6, down from the 109.3 in October which is also the lowest since the Brexit referendum.

Household spending has widely driven the economic growth of the United Kingdom since the Brexit vote. However, analysts anticipate consumers to slow down on spending as inflation remains to bite into their real incomes.

The newest data from the Bank of England, which increased interest rates for the first time in 10 years this month, reveals a slowdown in recent months in the relatively high rate of consumer-borrowing growth.

However, a number of retail sales indicators have held up.

Last month, BDO, an accountancy firm, reported that its High Street Sales Tracker discovered that overall like-for-like store sales grew by an annual 2.9 percent in September, adding to a smaller increase in August.

In November. the Distributive Trades Survey of the CBI revealed that 39 percent of the respondents reported sales volumes up on the same time in 2016.