Consumers sceptical on major purchases but savings continue to grow – index

Consumer confidence edged down in August but remains above pre-pandemic levels, according to an index.

GfK’s UK consumer confidence barometer measures how households feel about their own financial situation and the wider economy.

The overall index score in August was minus eight, dropping from minus seven in July but above the minus nine score in June.

Attitudes towards making major purchases were the biggest driver for the fall, with sentiment turning negative, having been in positive territory a month earlier.

The major purchase index scored minus three in August, compared with a positive score of two in July – although the latest data is still far higher than the minus 25 scored in August 2020.

By comparison, consumers were looking to savings instead, with a positive position of 25 – up five points on last month.

While the overall index was still a negative score, indicating downbeat sentiment, it was a one-point improvement compared with March 2020 before the first national lockdowns hit.

Within the overall score, households’ forecasts for their personal finances over the next 12 months held steady compared with July with a score of 11.

This was 10 points higher than August 2020, when the score was one.

When households were asked how they expect the general economic situation to develop over the next 12 months, the score on this measure was minus six, deteriorating by one point from minus five in July.

Households were also slightly more negative about the general economic situation over the past 12 months in the latest survey.

Joe Staton, client strategy director at GfK, said: “Against a backdrop of cooling headline inflation and soaring house prices, the UK consumer confidence index is stable at minus eight 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.

“Interestingly, this month the five-point fall in the major purchase index is counterbalanced by the five-point rise in the savings index, suggesting that consumers could be considering switching into saving rather than spending.

“Indeed, UK consumers have built their savings to record levels during Covid. 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.”