Finance / Consumer confidence rebounds following election shock slowdown
Consumer confidence regained its poise in July after suffering a slowdown in the wake of Theresa May’s shock General Election result.
The YouGov/Cebr consumer confidence index climbed to 107.3 in July, rising from 107.1 the month before, as concerns over the squeeze on household spending eased.
It marked the first time in four years since the reading was last below 108 for two consecutive months.
A readout above 100 suggests more consumers are confident than unconfident.
Stephen Harmston, head of YouGov reports, said: “Consumers have absorbed the turbulence of the past couple of months and things have settled down.
“It is notable, though, that consumer confidence remains below the level we saw before the election and is still significantly lower than before the EU referendum.
“As the slow puncture in household finances continues it is clear that people are feeling the effects of inflation in their day-to-day lives.”
It comes after the official figures last week showed the UK economy had struggled to gather pace following a lacklustre start to the year, diminishing the chance of the Bank of England hiking interest rates in the coming months.
The Office for National Statistics (ONS) said gross domestic product (GDP) expanded by 0.3% in its initial estimate for the second quarter, up from 0.2% during the first three months of the year.
Households have seen their spending power come under sustained pressure from lacklustre wage growth and higher inflation, leading to an expansion of credit and a decline in savings.
The survey, compiled from 6,000 interviews each month, revealed that household finances had declined for fourth months in a row and reached their lowest level since December 2014.
However, respondents to the survey were optimistic about the outlook for their finances for the year ahead.
There are tentative signs that the strain maybe easing on consumers after inflation unexpectedly fell in June to 2.6%.
Nina Skero, head of macroeconomics at the Centre for Economics and Business Research (Cebr), said: “Last week’s relatively weak GDP figures point to the UK economy facing a tough test over the next year, and these figures suggest that while the shock of the election result may have been absorbed, a lot of uncertainty remains.
“With the recent inflationary pressures, the decline in people’s household finances over the past month is to be expected.
“However, what could be as troubling for many consumers over the coming year is the cooling off of property market expectations over the next 12 months – if house prices fall once again then tricky economic conditions would get even more difficult.”
Weak GDP growth coupled with the slip in the cost of living has dashed the prospect of the Bank raising interest rates from record lows of 0.25% when the Monetary Policy Committee (MPC) reveals their latest decision on Thursday.
Jonathan Brady/PA Wire