GfK consumer sentiment improves in December but outlook deteriorates

Consumer confidence in the UK improved a touch in December, but the public are much less confident when it comes to their expectations for next year.

GfK’s consumer confidence index nudged up to -7 from -8, beating expectations for it to remain unchanged.

However, the measure for expectations for the general economic situation over the next 12 months fell one point to -23, which is down 17 points from December 2015.

The major purchase index was up seven points from November to 12, while the savings index increased six points to -5.

Joe Staton, head of market dynamics at GfK, said: “The past 12 months were a really turbulent year for confidence in the UK as consumers reacted to the dramatic economic and political turmoil of 2016.

“While consumers remain relatively confident about their personal financial situation, confidence in the general economic situation for the UK has collapsed in the face of uncertainty about the future both at home and abroad. Despite everything, consumer resilience is shown by strength in the major purchase index, the ‘now is a good time to buy’ mantra being reflected in strong retail sales growth.

“Looking ahead to 2017, against a backdrop of Brexit negotiations, the decline in the value of sterling, and the prospect of higher inflation impacting purchasing power, we forecast that confidence will be tested by the storm and stress (Sturm und Drang) of the year to come.”

GfK’s sub-index gauging British households’ confidence about the general economic situation over the next 12 months dropped one point to -26, while the index tracking sentiment about people’s personal financial situation over the next 12 months was up one point to 3.

Barclays said: “Households overall appear slightly more optimistic regarding their intentions to make purchases over the next 12 months, with the index making up for most of its November drop. However, households also appear somewhat more cautious as their intentions to save over the next months also increased. This apparent contradiction likely reflects ongoing fears regarding inflation as the price measure of the GfK survey remained elevated, just 2 points off its all-time high reached in November.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "It is obviously a relief that consumer confidence did not deteriorate further following November’s sharp drop and managed to edge up. Even so, the overall appreciable weakening in confidence over the fourth quarter and serious concerns over the economic outlook fuels belief that consumer spending will slow markedly in 2017 amid weakening fundamentals."