Consumers pull back from major purchases with Christmas on the horizon

Consumers are losing confidence in their personal finances as well as the future of the UK economy, suggesting tough times are ahead for retailers in the run-up to Christmas.

All five measures in GfK’s Consumer Confidence Index decreased in October, resulting in an overall decline of two points to -14.

Within this, the forecast for personal finances over the next 12 months decreased by three points to one, while the index measuring changes in personal finances during the last 12 months dropped by one point to one.

On top of this, consumers have a declining intent to make major purchases (down two points to one) and increasing propensity to save. While the savings index decreased two points in October to 21, meaning people are feeling slightly less inclined to save than they were in September, this is nine points higher than in 2018.

The measure for the general economic situation of the country during the last 12 months, meanwhile, decreased by one point to -33, five points lower than in October 2018.

Similarly, expectations for the general economic situation over the next 12 months decreased two points to -37, nine points lower than October 2018.

“The uncertainty arising from Brexit masks otherwise benign conditions such as the UK’s high rate of employment, growth in average earnings and low inflation – those are factors that would usually boost consumer confidence,” explains GfK’s client strategy director, Joe Staton.

“However, delays to Brexit work against this. The measures for October on personal finance and the general economy were down but it is notable that the drop is steeper for how consumers feel about the year to come, as opposed to how they feel about the past 12 months. People want to reach a point where they can move on from the Brexit debate so that they can look ahead with a fresh pair of eyes.”