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UK Consumer Confidence: ‘Stoic amid fear of the unknown’

New data from GfK indicates that consumer confidence rose in February despite huge unknowns over Brexit.

The research outfit says its Overall Index Score in February 2019 was -13 as three key measures increased and two stayed at the same level – to the surprise of its analysts.

The UK Consumer Confidence Barometer is conducted by GfK on behalf of the EU, with similar surveys being conducted in each European country.

Personal Financial Situation

The index measuring changes in personal finances during the last 12 months stayed the same in February at 0; this is also the same as this time last year.

The forecast for personal finances over the next 12 months stayed the same at +1; this is four points lower than February 2018.

General Economic Situation

The measure for the general economic situation of the country during the last 12 months increased two points to -33; this is four points lower than February 2018. 

Expectations for the general economic situation over the next 12 months increased one point to -38; this is 12 points lower than February 2018.  

Major Purchase Index

The major purchase index increased three points in February 2019 to +5; this is five points higher than February 2018.    

Savings Index

The savings index has increased four points in February to +18; this is six points higher than at this time last year.

To download the full set of charts for the GfK Consumer Confidence Barometer UK – February 2019 click here.

Joe Staton, Client Strategy Director at GfK, said: “Despite a slowdown in overall growth and concerns about the impact of Brexit uncertainty on the UK economy, topline consumer confidence is stable again this month. 

“Although bumping along in negative territory, the Overall Index Score is not showing any sign of making the dramatic drop seen after the June 2016 Brexit Referendum or in the early days of the last financial downturn. 

“While the view on personal finances looking at the year to come is still marginally positive, the continuing depressed sentiment towards the general economic situation might point towards the calm before the storm of post-Brexit headwinds and potential negative economic outcomes. 

“Are we on the edge of some kind of economic or livelihood precipice? Consumers are like markets, they respond to certainty and that’s in short supply just now. It is worth bearing in mind that many economic indicators (employment levels, wage growth) remain positive. But it is frankly amazing that confidence is so stoic and stable in a world of sharp political instability and fear of the unknown.”

eCommerce gains ground in technical consumer goods markets

In the first half year of 2018 eCommerce accounted for approximately a third of the total value of technical consumer goods (TCG) sold globally to consumers.

Across 18 European countries* though, online shares are still below that mark at currently 25 percent, according to the latest numbers from market tracker GfK.

However, European e-commerce retailers were able to steadily increase their shares over the past years (2015: 21 percent). This is because not all product categories are equally popular when it comes to buying online. This may change as the European online retail sector is undergoing a massive change.

On a regional level, APAC and foremost China were driving global online sales. Chinese e-commerce retailers enjoyed significant double-digit growth at nearly 23 percent. In the first half of 2018, the online share of technical consumer goods sales in China reached over 30 percent.

Unlike the US and Europe, where internet penetration levels are at 80 percent or higher in most countries, China’s internet penetration is still low at 55 percent as much of its population is located rurally.

However, further investments into China’s infrastructure will set the ground for further growth of internet usage and thus online sales. As much as internet adoption in China is a great challenge, at the same time it reveals a huge growth potential for China’s e-commerce giants.

China today already has the biggest internet community with 773 million internet users in a total population of 1.4 billion – growing year by year. This growth will open doors to new money for Chinese online retailers – increasing their global power for investments and expansion into the European market.

European e-commerce market accelerates

In Europe, at least for the start, Chinese e-commerce giants are expected to be focusing on product categories where other competitors have left space or where product categories are lagging behind for online sales. Today’s consumers in the 18 observed European countries are feeling most comfortable buying IT products online (online share: 38 percent) over other product types.

However, less popular online category sectors such as Telecommunication (online share: 21 percent), Consumer Electronics (online share: 22 percent) and Small Domestic Appliances (online share: 28 percent) are again showing high levels of online growth in the first half year 2018  – making these the product sectors to watch for increasing levels of online sales activities.

Mobile devices will be further spurring the e-commerce market

For a growing number of tech-savvy, time-poor consumers, shopping from a smartphone or tablet is becoming an increasingly popular way to buy online. For more than every second technical durable goods shopper in 2018, ‘their mobile device is becoming their most important shopping tool’ with a significant upward trend (2015: 40 percent), according to a recent GfK study.

Again, the Chinese e-commerce giants are well positioned in the area of m-commerce through many years of experience in their home markets. Buying mobile is already mainstream in China, and for more than 80 percent of all technical durable goods shoppers in China, their smartphone or tablet is the preferred shopping device (GfK study from 2018).

Key retail players in Europe with a competitive advantage

Strong alliances amongst key players in Europe will be able to address these new challenges in the retail sector. Partnering retailers will take competitive advantage of their unique omnichannel selling propositions – allowing them to bring the best on- and offline shopping experience to their customers through new technologies, joint innovation activities, and co-investments into big data analytics.

As much as the ongoing changes in Europe can be seen as most disruptive for technical consumer goods retailing, ‘traditional’ retail has not lost its attraction: The percentage of consumers who believe that physical stores today are less important than a few years ago has not changed over time (2015: 43 percent vs 2018: 43 percent).

Credit Card

Tough time for the High Street… now consumer confidence dips again

More bad news for the High Street as the Consumer Confidence Index drops one point.

It comes on the heels of a further period of bad news for the UK retail landscape, with both Toys R Us and Maplin entering administration and New Look announcing store closures.

GfK’s long-running Consumer Confidence Index dropped one point in February. Three of the five measures decreased in February, one stayed at the same level and one increased.

Personal financial situations, concerns about the general economic situation and rising prices are being blamed for the downwards shift.

“Ongoing concerns about sluggish household income, rising prices paid by consumers in the shops, and the prospect of inflation-busting council tax and interest rate hikes has dented confidence after last month’s surprising rally,” said Joe Staton, Head of Experience Innovation UK at GfK.

“The two-year trend of negative  sentiment – the Overall Index Score has bounced between zero and -13 since February 2016 – proves consumers feel pessimistic about the state of household finances and the wider UK economy.

“Shoppers continue to rein in spending, witnessed by the drop in the Major Purchase Index and the gloomy start to 2018 for many retailers. Despite positive news about upgraded growth forecasts, and the promise of higher wage increases this year, confidence will remain subdued until we feel the positive impact on our purses. Consumers have good reason to feel jittery and depressed.”

The UK Consumer Confidence Barometer is conducted by GfK on behalf of the EU, with similar surveys being conducted in each European country. The survey is conducted amongst a sample of 2001 individuals aged 16+.