Consumer confidence defiant but personal finance fears loom


Consumers have defied expectations that their economic confidence would falter and cause a slowdown in spending, according to figures released today.

The GfK consumer confidence index rose a point to -9, up from a negative balance of -10 in August and building on an upward shift of two points in July, the Telegraph reports.

The index, which examines consumer spending and saving behaviour as a means to gauge the economic outlook, is based on September data and follows a surprise 1 per cent rise in August retail sales, in data released by the Office of National Statistics (ONS).

But while spending levels indicated that consumers felt positive, with their major purchasing activity up by a point from August, attitudes to saving may cause concern. The research showed fewer people in September thought it was a good time to save, an unsurprising drop given present low interest rates. Consumers also took an increasingly negative view of their present and future financial situation which indicates that, as consumer debt grows apace, they are likely to be borrowing more.

Joe Staton, head of market dynamics at GfK, said the figures were at odds with the double bind of higher inflation and weak wage growth which had led many commentators to expect a cut back on shopping.

“But consumers are still spending out there, and have repeatedly defied predictions of a downturn since last year’s Brexit vote, partly by running down savings and/or borrowing more. Indeed, the major purchase indicator has crept up a second month in a row and the savings index has sagged. It’s live now, pay later. This defiant consumer mood seems to be the ‘new normal’. But how long can it last?” he warned.

Ruth Gregory, UK economist at Capital Economics, noted that although historically there has been a fairly close inverse relationship between changes in official interest rates and consumer confidence, this appears to have changed since the late 1980s and early 1990s.

“A possible reason for the weaker relationship between interest rates and sentiment in recent decades could be that the increased availability of unsecured credit has made it easier for households to deal with a rise in their debt payments. Alternatively, the greater transparency of the inflation-targeting regime could have made interest rate changes less of a shock,” she said.

Other recent measures of personal finances appear to be more healthy. Figures released by the ONS on Thursday showed a substantial rise of 62.5 per cent in the number of active private pensions, as the Government’s program of automatic enrolment in workplace schemes takes hold.