Dose of caution with consumer confidence

Households lost some confidence in the economy this month as the end of the furlough scheme approached but levels of optimism are still close to record highs.

GfK’s consumer confidence index fell by one point to -8 in August as households cut back spending on big-ticket items following an initial boost when the economy emerged from lockdown in the spring.

The major purchase sub-index fell by five points to -3, while the savings index rose by five points to 25, suggesting that households are cautious about spending their lockdown savings amid uncertainty about how the economy will fare when government support measures are withdrawn in September.

Although households are more positive in their assessment of how the economy coped over the past year, they are slightly more cautious about the coming year. The sub-index for the general economic situation over the coming year slipped by one point to -6.

Despite growing concern about the future, households are still confident about their personal circumstances. The furlough scheme has protected incomes over the past year and people coming off the scheme are entering a healthy jobs market, with vacancies soaring and joblessness falling as businesses respond to growing demand.

The sub-index for personal financial situations over the coming year was flat at 11.

Joe Staton, client strategy director at GfK, the German provider of data and analytics to the consumer goods industry, said: “Against a backdrop of cooling headline inflation and soaring house prices, the UK consumer confidence index is stable at minus 8 this August. Importantly, expectations for our personal financial situation for the coming 12 months are holding up and this positivity bodes well for the economy going forwards this year and next.”

“With the economy continuing to open up and GDP bouncing back, the overall picture for the economic health of the nation is looking good for the remainder of 2021. There are compelling reasons here to be cheerful as we begin to put the hardest pandemic months behind us.”