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Summary
- Gfk’s consumer confidence reading stood at -33 for the first fortnight of November
- The second lockdown has caused the sudden drop in the index
- Consumer confidence is a crucial indicator for economic growth in the next quarters
The monthly UK Consumer Confidence Index (CCI) published by market research firm Gfk has dipped to -33 for the first two weeks of November from -31 during the same period last month mainly due to the imposition of the second lockdown from 5 November.
Market experts have termed this fall as worrisome as it indicates consequences of dragging the economic activity down. This is the second time the index has dropped this year. In April, it had plummeted to a low of -34.
The imposition of the second lockdown is blamed for this fall by experts. However, a lack of government stimulus like the earlier one is being cited as the reason behind the fall.
However, it is expected that there will be a sharp turnaround in December’s consumer confidence levels when the lockdown opens.
It is to be noted here that the second lockdown is not as stringent as the first one. People are moving out and most establishments are open till late evening.
The Gfk report
The Gfk report said that the plunge in CCI for November is more serious than the earlier one as it comes amid rock bottom interest rates, a buoyant housing market and robust government stimulus.
Among the major constituents of the CCI, the personal finance situation was the worst hit and recorded its lowest value since December 2013. Most other parameters like the economic situation and future for shopping also remained in the negative territory.
It is worth a mention that the British economy grew by 1.1 per cent in September. It grew slower than expected and lagged most advanced nations for this month.
The second lockdown has flared up the fear of a rise in job losses. The rising number of people entering the furlough scheme for the second time has been depressing not just for employees, but also for businesses who continue to remain under financial distress.
The prospects of a no-deal Brexit are also dampening the consumer sentiments. Many businesses will need to completely revamp their operations once the Brexit transition period expires on 31 December and be prepared for higher tariff and non-tariff barriers. This might see supply chain disruptions and rising in production costs. Many would be forced to shut down operations, which would make jobs redundant. Many could raise their product prices to sustain their operation. Consumers lack clarity on how the government is planning to mitigate the Brexit crisis.
The expected recovery
December is the most crucial month for business activities. People save the whole year to spend the maximum in this period. Businesses clear out their stocks and make up the most. This year too, business owners are expecting to make up for the entire year’s losses. Pent up demand from both the lockdowns might come to their rescue losses if these hopes are realised.
But market experts feel that the Christmas celebrations would be subdued this year. Nevertheless, businesses would try to make the best out of it, as it is the last opportunity to up sales this year. However, there are some renewed hopes that a mass vaccination program could begin within the first quarter of 2021.
