UK consumer confidence holds steady in June as inflation threat looms

Consumer sentiment in the UK remained stable at its highest level since the start of the coronavirus pandemic in June amid the gradual reopening of the economy after months of lockdown, and looming inflation.

According to GfK’s long-running consumer-confidence barometer, June’s reading stood at -9, unchanged from April. However, this was below the -8 consensus forecast polled by Wall Street Journal economists, while economists polled by Reuters had forecast a small rise to -7.

The survey, which began in 1974, polled around 2,000 individuals between 1 and 15 June.

It came as UK prime minister Boris Johnson announced a four-week delay to the final stage of Britain's roadmap out of lockdown this month as cases of the Delta variant, which was first detected in India, began to rise.

However, GfK's client strategy director Joe Staton highlighted that the stabilisation of the indicator does not mean that consumer confidence is set to fall sharply again.

"While the shifting sands of an end to lockdown might be the closest most of us get to a summer beach holiday, consumer confidence remains stable at -9 after 16 months of a COVID-induced roller-coaster,” he said. “The upwards trajectory for the index since the dark days at the start of the pandemic is currently still on track.”

Read more: UK business confidence soars to seven-year high

Among the five measures that make up the consumer-confidence barometer, four of them increased and one decreased.

Consumers’ assessment of their personal financial situation over the last 12 months, and the next 12 months both rose, up four points and one point respectively from last month, as well as confidence in the general economic situation over the last 12 months.

The measure that decreased six points, from 4 to -2, was the general economic situation over the next year amid forecasts for rising retail price inflation, which could weaken consumer confidence.

Staton added: “The personal financial situation indices all rose, as it did the major purchase index, which gauges demand among shoppers. This improvement could see consumers spending in anticipation of a staycation summer.

“Forecasts for rising retail price inflation could weaken consumer confidence quickly and that may account for the six-point dip in June in our measure for the wider economy in the coming year.”

Read more: UK companies raise prices at fastest rate since 1999

The major purchase index, an indicator of confidence in buying big ticket items, also improved for the third month in a row to -5, 27 points higher than it was this time last year.

It comes after the Bank of England (BoE) on Thursday said it expects UK consumer price index (CPI) inflation to rise to 3% in the coming months. However, officials insisted that a surge in prices will be temporary, saying it will then drop down towards its 2% target.

"CPI inflation is expected to pick up further above the target, owing primarily to developments in energy and other commodity prices, and is likely to exceed 3% for a temporary period," the Bank said in its statement.

"More generally, the committee’s central expectation is that the economy will experience a temporary period of strong GDP growth and above-target CPI inflation, after which growth and inflation will fall back."

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