New data offers a glimpse into the British consumer’s mindset and what it means for the near term.
The U.K. consumer confidence index reading for August was a “minus 8,” dipping slightly from “minus 7” in July, “just below its pre-pandemic level,” according to an “Economic Indicators” report from the nation’s House of Commons Library. That was better than the “minus 9” in June, and far better than the “minus 27” reading in a year ago.
“Against a backdrop of cooling headline inflation and soaring house prices, the U.K. consumer confidence index is stable at minus 8 this August. Importantly, expectations for our personal financial situation for the coming 12 months are holding up and this positivity bodes well for the economy going forward this year and next,” Joe Staton, client strategy director at GfK, said.
But the caveat happens to be a 5-point fall to “minus 3” from July’s reading of “2” in the major purchase index, which Staton said is counterbalanced by the 5-point rise in the savings index to 25 from July’s reading of 20. This suggest that “consumers could be considering switching into saving rather than spending,” Staton said.
But because consumers in Britain have built their savings to record levels during the Covid-19 pandemic, the thinking is that the overall picture for U.K. economic health looks good for the remainder of 2021 as the economy continues to open up and GDP (gross domestic product) bounces back.
“There are compelling reasons here to be cheerful as we begin to put the hardest pandemic months behind us,” Staton said.
U.K. foot traffic across all U.K. retail destinations fell by 1.7 percent last week from the week before, with a drop of 2.2 percent in high streets and more modest drops of 1.3 percent in shopping centers and 1 percent in retail parks.
“Rain most days across all areas of the U.K. accompanied by cool temperatures led to footfall across U.K. retail destinations dropping from the week before, eradicating all of the uplift gained in the previous week,” Diane Werhle, insights director at data firm Springboard, said.
In the comparable week a year ago, footfall increased by 4.1 percent across all destinations. While U.K. foot traffic in the same year-ago week benefited from weather that was “hot and sunny,” footfall also received a boost from the Eat Out to Help Out promotion as the nation was easing some Covid restrictions.
As of last week the U.K. no longer limits the number of people who can attend “life events,” such as receptions and celebrations, and no longer requires, but instead recommendations, that people wear face masks in crowded areas.
It probably won’t be known for at least another month what will be the trajectory of consumer confidence in the U.K., whereas in the U.S., a hint of shoppers’ willingness to open their purse strings is expected shortly. Data suggests U.S. consumer sentiment could be on the decline.
Springboard’s most recent data for U.K. foot traffic from Aug. 8-14 show a 9 percent decline from the week before, representing more than four times the scale of decrease in the previous week and also reflecting the largest decline since around April 11.
Wehrle said the decline in activity widened the gap from 2019 to down 44.6 percent from down 40.9 percent the week before, representing the “first downward slide for five weeks.”
And earlier this month, The University of Michigan‘s gauge of consumer sentiment fell to its lowest reading since 2011. The preliminary reading on Aug. 13 was at 70.2, a 13 percent drop from July’s 81.2 and below the April 2020 low of 71.8 just after the start of the pandemic in the U.S. The final reading for August is set for Friday.
Coming up next week will be the monthly report from The Conference Board’s Consumer Confidence Index.
The two readings are good measures of U.S. consumer confidence, even if they don’t always match up. That’s due in part to the surveys being conducted at different times of the month. An exogenous event, or even a spike in gasoline prices, could impact how a respondent completes the survey. The two also are different in what they are trying to assess. The University of Michigan tends to ask more detailed questions, while The Conference Board surveys reflects a larger sampling.
Yet, both give a good overall picture of the consumer mindset, with The University of Michigan focusing on key spending triggers, such as gasoline prices, and The Conference Board focusing on bigger picture indicators, such as the jobs front.
Separately, the National Retail Federation said last month that it remained aligned with its revised 2021 sales forecast, which upgraded retail sales guidance to a 10.5 percent to 13.5 percent improvement from an initial projected growth rate of 6.5 percent to 8.2 percent. Chief economist Jack Kleinhenz said there was no indication that Covid’s Delta variant was impacting consumer behavior and that households remain flush with cash.