Introduction: UK consumer confidence at historic lows
Good morning and welcome to our continued coverage of business, the global economy and financial markets.
UK consumer confidence has fallen to its lowest level since records began almost 50 years ago, as the cost-of-living crisis affects households and a summer of strikes is approaching.
Research firm GfK’s monthly survey on the consumer confidence index has hit a new record low this month, dropping one point to -41 in June.
UK Consumer Confidence Report Photo: GfK
There was a particularly sharp drop in people’s personal financial expectations as inflation reduced incomes.
Measures of changes in personal finances over the past year, and of the general economic situation over the last year and the following year went down.
Joe Staton, director of client strategy at GfK, says Britain is facing a new economic reality and people are reacting accordingly:
With prices rising faster than wages, and the prospect of strikes and spiraling inflation causing a summer of discontent, many will be surprised that the index has not fallen further. Consumers’ moods are currently darker than in the early stages of the Covid pandemic, the result of the 2016 Brexit referendum, and even the shock of the 2008 global financial crisis, and now there is talk of an impending recession.
One thing is for sure, the UK is facing a new raw economic reality and history shows that consumers will not hesitate to cut and tighten the laces of their bag when things get tough ”.
UK Consumer Confidence Index Photo: GfK
British leaders are also sadder.
Rapid estimates of the economy’s performance in June, released yesterday, showed business optimism at its lowest level since the first months of the Covid pandemic in the spring of 2020 and the sharpest fall in new order volumes for a year.
Later today we will find out how optimism is being maintained (or not) between German investors and American consumers, as fears grow that large economies may fall into recession.
The agenda
- 7:00 BST: Retail sales in the UK in May
- 9:00 BST: German business confidence IFO index
- 2.30pm BST: Bank of England chief economist Huw Pill gives a speech on “Inflation and debt: challenges for monetary policy after Covid-19”
- 15:00 BST: University of Michigan Survey on U.S. Consumer Sentiment
- 15:00 BST: Report on new home sales in May
The cost-of-living crisis was a little harder last month, says Nicholas Farr, deputy economist at Capital Economics:
The 0.5% m / m drop in retail sales volumes in May (consensus -0.7% m / m) was the third drop in four months, following a revised downward increase in the April and suggests that real incomes begin to fall due to higher inflation. to further affect consumer spending.
It is likely to see more pain in the retail sector in the coming months, but that won’t stop the Bank of England from raising interest rates even further.
BJSS: Small sign of a turn
On an annual basis, retail sales volumes decreased by 4.7% compared to May 2021.
But the amount invested rose 5% year-on-year, revealing how inflation is taking a bite in revenue.
Ralph Robinson, head of retail at technology consultancy BJSS, says retailers could face a tough summer as customers set tighter spending limits.
“It is not surprising that consumer confidence is so low; Amid a further rise in inflation, poor FTSE performance, supply chain uncertainty and an impending recession, it seems retailers are struggling to get anything other than inevitable spending, such as on food. , with holiday fashion the only notable exception. For me, ASDA President Stuart Rose better sums up current consumer sentiment: sharing such as shoppers set spending limits of £ 30 on checkouts, even below the £ 40 limits quoted by the president of Tesco, John Allan, just a month ago.
“Unfortunately, while retailers will be looking forward to a set of satisfactory results next month, there are few signs of a turnaround as retailers face additional pressure on supply chains. supply, driven by pressure from Covid in China, rail strikes in the United Kingdom and the ongoing conflict in Ukraine, along with reduced street traffic.Although we expect an increase, with inflation showing no a sign of reduction, retailers are likely to be concerned that this trend will continue throughout the summer season. “
Households slowed spending as the cost of living crisis continued to squeeze consumer demand, says Helen Dickinson, executive director of the British Retail Consortium:
Many customers are shopping downstairs, especially with food, choosing valuables where they might have previously bought premium goods. High-value items, such as furniture and appliances, were also affected, as buyers reconsidered major purchases during this difficult time.
Higher operating and entry costs have pushed up prices, so both retailers and their customers are facing “difficult times,” Dickinson adds:
Supermarket reviews suggested customers were spending less in their grocery store, due to rising cost of living, says Heather Bovill, deputy director of surveys and economic indicators at the ONS.
Here is his analysis of today’s retail report:
Clothing stores had a busier May, with clothing sales up 2.2% during the month.
But consumers cut household items, where sales fell 2.3%, and department stores where volumes fell 1.1%.
The volume of car fuel sales rose 1.1% in May.
This may be due to an increase in hybrid work and a drop in those working exclusively from home, the ONS says.
Retail sales are falling as consumers cut back on food
Retail sales fell in May as rising cost of living affected family budgets, forcing people to cut back on food purchases.
Retail sales volumes in the UK fell 0.5% in May from April, or 0.7% if motor fuel is excluded, figures just released show .
The fall in sales volumes was driven by lower spending in grocery stores, which fell 1.6% month-on-month.
The reduction in spending on grocery stores appears to be related to the impact of rising food prices and the cost of living, according to the National Bureau of Statistics.
But … buyers had to spend more to get less. The value of retail sales increased 0.2% month-on-month and 0.6% once fuel was added (which reached record prices).
Retail sales in the UK through May Photo: Office for National Statistics
Inflation reached 9.1% in May, the highest in 40 years, which intensified wage repression.
In the three months to May 2022, sales volumes fell 1.3% compared to the previous three months. This “continues the downward trend since the summer of 2021,” the ONS says.
Updated at 07.22 BST
Introduction: UK consumer confidence at historic lows
Good morning and welcome to our continued coverage of business, the global economy and financial markets.
UK consumer confidence has fallen to its lowest level since records began almost 50 years ago, as the cost-of-living crisis affects households and a summer of strikes is approaching.
Research firm GfK’s monthly survey on the consumer confidence index has hit a new record low this month, dropping one point to -41 in June.
UK Consumer Confidence Report Photo: GfK
There was a particularly sharp drop in people’s personal financial expectations as inflation reduced incomes.
Measures of changes in personal finances over the past year, and of the general economic situation over the last year and the following year went down.
Joe Staton, director of client strategy at GfK, says Britain is facing a new economic reality and people are reacting accordingly:
With prices rising faster than wages, and the prospect of strikes and spiraling inflation causing a summer of discontent, many will be surprised that the index has not fallen further. Consumers’ moods are currently darker than in the early stages of the Covid pandemic, the result of the 2016 Brexit referendum, and even the shock of the 2008 global financial crisis, and now there is talk of an impending recession.
One thing is for sure, the UK is facing a new raw economic reality and history shows that consumers will not hesitate to cut and tighten the laces of their bag when things get tough ”.
UK Consumer Confidence Index Photo: GfK
British leaders are also sadder.
Rapid estimates of the economy’s performance in June, released yesterday, showed business optimism at its lowest level since the first months of the Covid pandemic in the spring of 2020 and the sharpest fall in new order volumes for a year.
Later today we will find out how optimism is being maintained (or not) between German investors and American consumers, as fears grow that large economies may fall into recession.
The agenda
- 7:00 BST: Retail sales in the UK in May
- 9:00 BST: German business confidence IFO index
- 2.30pm BST: Bank of England chief economist Huw Pill gives a speech on “Inflation and debt: challenges for monetary policy after Covid-19”
- 15:00 BST: University of Michigan Survey on U.S. Consumer Sentiment
- 15:00 BST: Report on new home sales in May