Consumer confidence index falls further into recession-indicating levels
GfK today said its consumer confidence index fell to another record low of -41 in June from -40 in May. Economists polled by Reuters had expected the market research firm’s index to hold at -40.
Joe Staton, client strategy director at GfK, said: “The consumer mood is currently darker than in the early stages of the COVID pandemic, the result of the 2016 Brexit referendum and even the shock of the 2008 global financial crisis, and now there’s talk of a looming recession.”
Meanwhile, the Office for National Statistics said that sales volumes in May fell by 0.5% on the month, which was a slightly smaller decline than the 0.7% drop expected by economists polled by Reuters.
Adrian Lowery, financial analyst at DIY investing platform and coaching service Bestinvest, comments: “The confidence reading is a telling indicator, as GfK’s survey measures the level of optimism that consumers have about the performance of the economy in the next 12 months. The index has been going for 48 years, so record lows are quite noteworthy.
“While the retail sales figure was not as grim as expected, the GfK index reveals the extent of household pessimism over the cost of living and the economy, exacerbated perhaps by the prospect of widespread strikes this summer, and suggests spending could be further reined in and put off.
“With consumer spending accounting for about 63% of UK GDP, the GfK index has been a closely-watched forward indicator of recession in the past. Economists warned in April and May when the index fell to -38 and -40 that those levels were consistent with a sharp economic downturn ahead.
“It comes after depressed purchasing managers’ index readings yesterday, which suggested business expectations on the economic outlook are now at the lowest level since May 2020, in the depths of the first Covid-19 lockdown.
“In one sense, however, bad news can be good news at the moment, because growing evidence pointing towards a weakening real economy could slow the path of Bank of England rate rises as the monetary policy committee balances the need to tame inflation with the danger of aggravating the slowdown or reversal in growth.”