November/December metrics: Pessimistic outlook for the New Year

Published on 17-01-2019 17:46:45


The consumer sector closed the year on a pessimistic note, with November and December metrics for consumer confidence providing bleak outlook. Consumer faith in the economy, as measured by the GfK Consumer Confidence Index, fell sharply in the final two months of the year

2019 outlook - GFK Consumer confience index

Source: GFK Consumer Confidence index, as at 14 December 2018

The index score reflecting trust in the general state of the economy over the next 12 months also worsened, by six points month-on-month in December, while expectations for personal financial stability over the next 12 months dropped by four points.
Figures from the British Retail Consortium echoed this tone. Like-for-like retail sales declined by 0.5% in November and 0.7% in December, representing ‘the worst December sales performance in 10 years’.
However, pub companies fared somewhat better. The Coffer Peach Tracker, a collection of sales figures from 49 leading restaurant and pub companies, showed like-for-like sales ahead 2.1% for pubs in December, bolstered by higher than usual alcohol licence requests and an increased demand for alcohol. Drink sales in pubs were up 3.0% according to Coffer Peach, against a 0.6% uplift in food sales.

2019 outlook - Coffer Peach Tracker

Source: Coffer Peach Tracker, as at 16 December 2019

Over the year ahead, the outlook remains challenging, with the significant level of uncertainty surrounding Brexit likely to continue putting pressure on consumer spending and new investment by businesses. On a more positive note, inflation (as measured by the Consumer price Index, CPI) eased to 2.1% in December, its lowest level in two years, and is forecast to remain in line with the Bank of England’s targeted rate of 2% in 2019. This may reduce the likelihood of further interest rate rises in the near term.
While the Office for Budget Responsibility (OBR) forecasts a deceleration in average earnings growth to 1.6% in 2019, compared with 2.6% in 2018real household disposable income growth forecasts remain broadly consistent at 0.6% in 2019. Independent forecasts for the latter, collated by the treasury, show at 30bp improvement compared with 2018.

2019 outlook - HM Treasury forecasts for the UK economy

Source: HM Treasury forecasts for the UK economy, as at 19 December 2019

However, any improvement in real disposable income may be countered by an increase in the savings ratio, which has reached a 25-year low of 3.8%. This, in turn, will put further pressure on retailers, which are already struggling to attract shoppers and protect margins

2019 outlook - ONS Household savings

Source: Office for National Statistics

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