A ray of sunshine from improved consumer confidence.
There has been some genuinely positive news for UK retailers this week in the shape of improved consumer confidence figures.
The long-running Consumer Confidence Index from GfK has been taking the pulse of the public’s finances for years, and provides an independent view of how people feel about money. Its numbers for June show an overall improvement of three points as shoppers – despite all the gloom about interest rates and mortgage payments – start to feel more optimistic.
This is the fifth month in a row that has seen an improvement in sentiment, even if the overall index score remains relatively poor. It is certainly heading in the right direction, and it may be relevant that some measures are consistently heading upwards. Consumers’ confidence in the general economic outlook, and in their own personal economic outlook, over the next year are both up by five points.
That improved confidence is being seen where it counts – at the tills. Figures just in from the Office of National Statistics show that retail spending rose during May. An extra bank holiday for the coronation of King Charles, some good weather, and pre-holiday shopping may all have helped increase the amount of things we bought.
Growth of 0.3% in sales may not sound huge, but when we are told that consumers are set to lose up to a fifth of their disposable income to higher mortgage payments, it is substantial and suggests that people are coping better than might be expected.
However, digging a little deeper into the figures can take some of the gloss off the good news. While we have collectively been spending more on summer clothes and at garden centres, people are also spending less on food. Food sales were down by 0.5% over the same period.
Hopefully some of that change is because we all ate out more over the many public holidays in May, but it does highlight an increasing polarisation in how resilient consumers are with regards to their personal economic situations. Some are comfortable enough to increase spending a little now they can see light at the end of the tunnel. Others are struggling to put food on the table.
Of course, retailers love a challenge and can be relied on to go the extra mile when they spot an opportunity. Poundland provides a good example with its plan to introduce grocery ranges to a further two dozen stores.
The retailer has quietly expanded its food offer to well over 500 stores, a move clearly welcome with those consumers at the more cash-strapped end of the scale.
How long might it take until the growing consumer confidence is shared more equally? That could be a long while but confidence can be contagious, and a ray of sunshine – now matter how small – always brings some benefits.