In the run up to the election, more consumers appear to be uncertain about the UK economy and more are uncertain about their own economic situation.
Six out of the seven indicators of consumer confidence tracked by Nationwide have shown a fall in March - the indicators refer to the balance of positive and negative responses:
• Current UK Economic Situation: confidence fell by 3 percentage points
• Current Employment Situation: confidence fell by 12 percentage points
• Future* Employment Prospects: confidence fell by 14 percentage points
• Future Household Income: confidence fell by 1 percentage point
• Spending Confidence – household purchase (eg white/brown goods): confidence fell 9 percentage points
• Spending Confidence – major purchase (eg house/car): confidence fell by 8 percentage points
Just one indicator rose:
• Future UK Economic Situation: confidence rose by 3 percentage points
The survey highlights increasing uncertainty across a range of indicators. The falls in overall confidence regarding the economy, employment and spending were primarily driven by a fall in the number of people who felt positive: there was a shift from people feeling positive to people being uncertain. In fact, with six of the seven indicators, uncertainty was at the highest level since Nationwide began tracking consumer confidence in June last year.
The fall in consumer confidence has been reflected in a number of other industry measures: the CBI recently reported that retail sales fell in March, companies including Boots, House of Fraser, Jessops and Next have reported disappointing sales, and the level of equity withdrawal and consumer credit borrowing have both shown recent falls.
This uncertainty was reflected in the minutes of the MPC’s latest meeting: “the available evidence suggested continuing uncertainty about the momentum in consumption growth”. While two members of the committee voted for a rate rise, uncertainty continued about the strength of consumer confidence following weak consumer spending figures from the British Retail Consortium in February (like-for-like sales fell by 0.3%).
Although confidence has dipped, this must be viewed in context. The fall in March was from a relatively high level as in February expectations of future household income, future job availability, the future direction of the economy and confidence regarding spending on major purchases were all at the highest level recorded.
In addition, confidence in the outlook for house prices remains stable. Having fallen to a low in November, house price expectations have improved, primarily driven by a reduction in those expecting house price falls. The survey shows that consumers expect price rises of 2.7% in the next six months confirming Nationwide’s view of a soft landing for the housing market.
Commenting on the figures Stuart Bernau, Nationwide's executive director, said: “There has been a notable downward shift in consumers’ confidence levels in March. With an election looming, more people are unsure whether they will be better or worse off in a few months time. This is a key moment for all political parties to capture the hearts and minds of voters in the crucial area of their economic well-being. The election has come at an interesting time with consumers becoming more uncertain about the state of economy and employment prospects.”
