Consumer Confidence Improves Slightly In July 2020, But Still Remains Negative

Summary

• The Gfk consumer confidence index at 3 July 2020 improved to (–27), from (–30) recorded in the previous month of June; however, it remains far below its last year level
• A closer look at the performance of all the 5 sub-components of the Gfk UK consumer confidence barometer - all except one (personal financial situation over the next twelve months) in the negative zone
• Savings index moving in the positive territory, indicating people are averse to spending and would rather save for the rainy day

It seems the enthusiasm built in the economy in the first two months since the lockdown was relaxed in May 2020 has lost steam as it entered July. The Gfk consumer confidence barometer, which is one of the most respected consumer confidence index in the United Kingdom, showed a slight increase of three points at the beginning of July 2020 as compared to June. However, since then it has not shown any improvement. The latest Gfk barometer index published on 24 July 2020 stands at (-27) which is the same as was recorded on 3 July 2020. However, three components of the index are up, while two are down for the two corresponding timelines.

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All the five sub-indices are displayed below. We have discussed how they have fared as compared to the past one month and over the same period in 2019.

• The personal financial situation over the past twelve months – This component of the index has shown a marked improvement over the past month. This sub-index which was at -9 in June improved to -5 in the 3 July report and has improved further to -4 in the 24 July report. However, when compared to the last year (+1, in June 2019), it shows a major deterioration.

Data Source – Gfk Consumer confidence barometer on behalf of European Commission (July 2020)

• The personal financial situation over the next twelve months –This sub-index has also registered an improvement over the past month. In June 2020, it was at the level of -4, improving to -3 in the COVID- 19 flash index published on 3 July and finally reaching a level of 0 on 24 July. However, the personal financial situation over the next twelve months displayed a major deterioration of as compared to a year ago during 2019. In July 2019, the value of this sub-index stood at 7, in the positive territory, from where it fell sharply once the lockdown was imposed across the UK.

Data Source – Gfk UK Consumer confidence barometer (July 2020)

• General economic situation over the past twelve months- The sentiments of the people regarding the general economic situation in the country have been deteriorating since the beginning of the year 2020. It is reflected in the sub-index as well. While this sub-index stood at a very low level of -59 in the month of June 2020, it deteriorated to -60 in the 3 July index and deteriorated further by one more point on 24 July index, to reach -61. Compared over the same period last year in 2019, this sub-index has seen a major deterioration (it was -32 in July 2019). This signifies that people believe that the country's economic situation has worsened over the last year, even after the lockdown opened in May 2020.

Data Source – Gfk UK Consumer confidence barometer (July 2020)

• General economic situation over the next twelve months- The situation on this sub-index is not as bad as the previous sub-index. However, people continue to remain pessimistic about the economic future of the country, almost like their perception a year back. The sub-index’s value for 24 July stood at -41 which was better than -42 reported on the 3 July in the COVID- 19 flash index barometer, which was again slight improvement over a value of -48 reported in June 2020. Compared over the previous year 2019, the sub-index value for July 2019 was marginally better at -32.

Data Source – Gfk UK Consumer confidence barometer (July 2020)

• Major purchase index – The final component of the index; the major purchase index has turned negative to -26 in the 24 July index publication in comparison to -25 reported in the 3 July flash report. Whereas on this sub-index head the 3 July index measure was a slight improvement of seven points over -32 reported for the month of June 2020.

Data Source – Gfk UK Consumer confidence barometer (July 2020)

The savings index: which does not form part of the main consumer confidence index

The savings index is also measured by the Gfk barometer, though it is a separate index and is not a part of the overall consumer confidence index. There has been a major improvement on this index between 3 July and 24 July a jump of seven points from 13 to 21 has been registered during this period. This compared to a drop of three points between June 2020 index and 3 July flash index clearly indicates that people have spent significantly less between 3 July and 24 July. An improvement in the savings index signifies that people think it is a good time to save.

Data Source – Gfk UK Consumer confidence barometer (July 2020)

Also Read: British Consumer Confidence Slips to New Decade Low in late May

As a summary, the Gfk consumer confidence index released on 24 July 2020 shows marginal improvement over the past one month. However, it continues to remain negative. Except for the sub-index of personal financial situation over the next twelve months, all other display negative figures. At the same time, a separate savings index is positive and rising over the past one month, suggesting that people wish to save more, and spend less. The course of the coronavirus pandemic in the next few months will be the major determinant of bringing any noticeable change in the consumer confidence amongst Britishers.