Consistent Rise In GfK Consumer Confidence Index; Spotlight On Healthcare, Retail, and Technology Stocks

Summary

• The continued government policy support has helped in a gradual improvement of consumer sentiments that hit a rock bottom with the imposition of a lockdown
• The GfK Consumer Confidence Barometer showed a mild improvement, rising from -27 in August 2020 to -25 in September 2020
• There has been a consecutive four months rise in the GfK consumer confidence index from the near-historic lows witnessed in April and May 2020
• The survey was carried out for the period of 1 to 14 September 2020

British economy has been derailed from its growth track after a stringent shutdown was imposed in March 2020 to halt the spread of Covid-19 cases. With industries, transport, shops, and malls shut, economic activity came to a grinding halt in the UK from the 23 March 2020, when the lockdown began. Layoffs, pay cuts, and decreasing purchasing power have completely eroded the overall demand and lowered the consumer sentiments.

However, after the economy was gradually re-opened, it provided a sense of relief to businesses - large and small. The consumer sentiments also started to improve and demand slowly rose for many sectors like housing, hospitality, and retail, with the help of supporting government policies.

With the ease in the lockdown restrictions, there was a gradual rise in the GfK Consumer Confidence Barometer from -27 in August 2020 to -25 in September 2020. However, even though the consumer confidence index for September 2020 jumped to its highest level since the coronavirus lockdown started in March 2020, it still remained negative and below its pre-pandemic level of -7 in February 2020.

At the same time, it is not to be ignored that there has been a consecutive four months rise in the GfK consumer confidence index from the near-historic low of -34 which was witnessed in April and May 2020. Factors that have contributed to this improvement are an improvement in general economic conditions, a drop in savings propensity, and a boost in the buying behaviour of consumers.

The survey was carried out during the first two weeks of the month, from 1 September 2020 to 14 September 2020, before Boris Johnson announced new social restrictions to stop the second wave of coronavirus cases across the United Kingdom. The sample size was 2000 individuals aged 16 years and above.

(Source: GfK, Growth for Knowledge)

Though a rising rate of unemployment is giving jitters to the nation, consumer spending among Britons has substantially rebounded since the initial shock of the lockdown.

Sectors like healthcare, technology and retail (catering to food and drinks) have made an opportunity out of the threat posed by the pandemic and are going to see a reasonable growth post the Covid era. Let’s zoom our lense on some of the industries that performing well in the present situation:

Healthcare Sector

Owing to the lockdown and all non-emergency treatments taking a back seat, the British healthcare sector has definitely faced hardships. At the same time, the pandemic has also seen immense investment in this sector.

In fact, it has now been realised by the world that the threat of a pandemic is very real and in order to safeguard the sector, future investments are a must have.

Rapid spread of the virus has forced people to take precautions to save themselves from this deadly disease. Consequently, personal Protective Equipment (PPE) kits, masks, medicines, oximeters, other medical devices have seen a rise demand.

The healthcare sector market is expected to see good growth in the near future. Pharmaceutical and medical device manufacturing companies have converted this pandemic into an opportunity.

AstraZeneca PLC (LON: AZN)- stock was last trading at GBX 8,576.00 on 25 September 2020, up by 0.20 per cent from its previous close. The 52-week low/high price was GBX 6,221.00/9,320.00. It was having a market capitalisation (Mcap) of £112,318.71 million.

GlaxoSmithKline PLC (LON: GSK) – stock was last trading at GBX 1,474.40 on 25 September 2020, up by 1.24 per cent from its previous close. The 52-week low/high price was GBX 1,374.60/1,846.00. It was having a market capitalisation (Mcap) of £73,072.89 million.

Retail Sector (Consumer Discretionary)

The continued fear of complete lockdown has promoted this sector to see a growth during these tough times, with food-based retail chains and essential commodity providers emerging as winners. The scope for companies in this segment has been broadened by the heightened need of healthy food and immunity-boosting products among consumers.

Companies are revamping their growth strategies by launching new products in the food and health categories, enhancing the distribution channel, and proving enhanced consumer services. The lockdown and social distancing requirements have compelled consumers to shift from eating outdoors to home-cooked food or ready to eat items, helping this sector in achieving growth in the medium-term.

Tesco PLC (LON: TSCO) – stock was last trading at GBX 216.00 on 25 September 2020, down by 1.41 per cent from its previous close. The 52-week low/high price was GBX 211.20/258.90. It was having a market capitalisation (Mcap) of £21,457.55 million.

Morrison (WM) Supermarkets PLC (LON:MRW)- stock was last trading at GBX 173.15 on 25 September 2020, down by 0.66 per cent from its previous close. The 52-week low/high price was GBX 164.20/204.70. It was having a market capitalisation (Mcap) of £4,199.65 million.

Technology Sector

With the paradigm shift in work culture and consumer behaviour during the course of the pandemic, people have started using digital medium for work commitments, education, and entertainment. Online platforms for work meetings have seen a massive rise in popularity, and video calling applications coming up with innovative features to makie it conducive for professionals to work from home. Schools and universities have also been facilitated to start online education and assessments. Sports events, music festivals, theatre, movies etc. had been suffering due to the lockdown restrictions. Hence, the online platforms for digital content has become a huge hit with many movies and shows seeing digital release instead of theatrical release. The sector has really seen a boom time like never before due to this pandemic.

Sage Group PLC (LON:SGE)- stock was last trading at GBX 714.80 on 25 September 2020, up by 0.06 per cent from its previous close. The 52-week low/high price was GBX 534.80/794.60. It was having a market capitalisation (Mcap) of £7,804.11 million.