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Retail

U.K. Consumer Squeeze Yet to ‘Hit Home' as Confidence Rises

British consumers have yet to feel the full impact of rising living costs, according to GfK.

A consumer-confidence index increased to a four-month high of minus 5 in May from minus 7 in April, the market-research firm said Wednesday. Its survey of 2,000 people found they had more confidence in their personal financial situation over the coming year and a greater willingness to make major purchases, though their opinion of the general economic outlook was unchanged.

While the index is “bumping along in negative territory, we haven’t seen any significant fall of the kind we might expect during such periods of pre-election and pre- Brexit uncertainty,” said Joe Staton, head of market dynamics at GfK. “Perhaps the real squeeze in living standards is yet to hit home.”

A separate report from job-search engine Adzuna showed that average advertized salaries hit a six-month high in May.

GfK’s survey contrasts with other signs that consumers are beginning to clamp down on spending in response to the pickup in inflation brought about by the pound’s post-referendum decline. With productivity remaining weak, the pressure on real earnings is set to continue, weighing on economic growth for the rest of the year, S&P Global Ratings said in a report Tuesday.

Pound Effect

A separate report from the British Retail Consortium Wednesday showed annual food-price inflation accelerating to 1.4 percent in May from 0.9 percent in April, driven by the pound’s fall. The overall impact was mitigated by heavy discounting of non-food items.

“We expect the general trend of inflation to be upwards over the course of the year, which will squeeze disposable income at a time when wage growth is slowing,” said Helen Dickinson, chief executive officer at the BRC.

Britons are also facing a period of political uncertainty ahead of a general election on June 8 and the start of Brexit negotiations. The pound came under pressure last week after polls showed Prime Minister Theresa May’s lead in opinion polls narrowing.

Households have had to borrow more in recent months to keep up their spending, a trend that may not be sustainable, according to GfK, which carried out its survey between May 1 and May 15.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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