Consumer confidence bounces back in August after Brexit vote

Consumer confidence in Britain rose at its fastest monthly pace since 2013, which suggested people were taking the economic effects from voting to leave the European Union in their stride.

The YouGov/Centre for Economics and Business Research (CEBR) consumer confidence index rose by 3.2 points in August, for its biggest month-on-month increase since February 2013. Standing at 109.8, the index had now recovered about half the ground lost since the Brexit.

The survey revealed increases in people’s expectations for the next year for property value, household financial situation, job security and business activity.

CEBR director Scott Corfe, said."This month's improvement in consumer confidence follows positive news from other areas of the economy and slightly punctures the arguments of those who predicted immediate economic armageddon following a Brexit vote.

“With consumer confidence rising and year-on-year retail sales up it is evident that the public have yet to feel many - if any - effects from the vote to leave the EU. Both inflation and unemployment are low, for now, which is undoubtedly supporting consumer optimism.

"However, this could easily change next year as the weakness of sterling pushes up the cost of imports. 2017 could be the year that consumers stumble."

The poll follows news that retail sales in August reversed much of their post-Brexit vote fall, as UK retailers posted their strongest sales in six months.

On 25 August, the Confederation of British Industry’s (CBI) retail survey found 35% of retailers said sales volumes were up in August compared with the previous year, while 25% said it was down. The resulting net balance rebounded from a reading -14% in July to 9%, which was largely due to the weak pound attracting overseas shoppers.

Despite optimism from consumers, companies have voiced their concerns over pending years of uncertainty regarding the country’s relationship with EU and the terms of Brexit.

"Consumer spending growth is set to slow following the vote to leave the EU, with labour market conditions deteriorating and rising inflation undermining real wage growth. Nonetheless, we don’t think a collapse is on the cards either, with confidence likely to recover a bit and both monetary and fiscal policy to provide support," Capital Economics said in a research report sent to clients in the previous session.

The think-tank's forecast was for real consumer spending growth to be around 2.5% in 2016, 1.5% in 2017, and 2.0% in 2018, versus the 2.6% pace seen in 2015.