Consumer confidence climbed this month, but signs point to slowing spending in 2017

 
Courtney Goldsmith
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Less confidence around big purchases points to lower spending in 2017
Less confidence around big purchases points to lower spending in 2017 (Source: Getty)

Overall consumer confidence edged up this month, but Britons showed they have less faith in making major purchases, signalling a spending slowdown in the year ahead, a new report suggests.

GfK's consumer confidence index, published today, climbed two points to minus five in January. Three of the five measures experienced increases this month, one was unchanged and one decreased.

It was the major purchase index, which measures consumers' intentions to spend big on pricey items like TVs and cars, that fell two points this month to 10 – that's six points lower than this time last year.

Joe Staton, head of market dynamics at GfK said this could be a sign of slowing consumer spending throughout 2017.

Read more: Weaker retail sales suggest the UK's consumer spending engine could stall

"Rising inflation and weak income growth is forecast to squeeze households’ disposable income, and these two factors could conspire to depress confidence for the year ahead. It’s certainly difficult to see where the oomph will come from over the short term," Staton said.

Consumers' views of their personal finances over the last and next 12 months both increased, up three and four points respectively. Both were lower than the measure in the prior year, however.

The research found consumers' view of the general economic situation over the past 12 months was up two points to minus 24, but still down 21 points from January 2016. Expectations for the economic climate in the next year remained the same at minus 23 this month, which is 18 points lower than the previous year.

Read more: Eurozone consumer confidence reaches 20-month high

Measure Point movement January 2017 December 2016 November 2016 January 2016
Overall Index Score +2 -5 -7 -8 4
Personal financial situation over last 12 months +3 3 0 1 4
Personal financial situation over next 12 months +4 7 3 2 9
General economic situation over last 12 months +2 -24 -26 -25 -3
General economic situation over last 12 months No change -23 -23 -22 -5
Major purchase index -2 10 12 5 16

Staton said consumer confidence remained negative this month due to a combination of Brexit jitters, Blue Monday and a wobbly pound pushing up prices despite strong GDP and record FTSE highs.

"Although consumers report that they are feeling upbeat about their personal financial situation for the coming year, stubborn concerns about the wider economy looking back 12 months and ahead 12 months are ensuring the overall index score remains stuck in gloomy territory," he said.

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