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Consumer confidence ‘regains momentum’ as optimism rises

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Consumer confidence “regained momentum” in August, providing much needed optimism that people are starting to see a light at the end of the cost of living crisis tunnel.

The drop in core inflation coupled with higher interest rates and rising average weekly earnings all contributed to a five-point rise in GfK’s Consumer Confidence Barometer this month, which tracks consumer sentiment.

Although the headline figure remains firmly in negative territory at -25 it is a marked improvement on this time last year when the overall index score was -44.

All five measures that make up the score increased this month, with the greatest increase being recorded in the major purchase index, which indicates how likely consumers are to buy big-ticket items. This increased by eight points to -24, up from -38 in August 2022.

Joe Staton, client strategy director at GfK, says this is “potentially better news for retailers as we move into autumn” and ahead of the key Christmas trading period.

Consumers’ view of their personal financial situation increased by five points to -15 (up from -25 in 2022), while their outlook for the coming 12 months increased by four points to -3, far higher than the -31 recorded in August last year. Staton suggests this is “key to indicating the future financial position of households”.

Meanwhile, consumers’ perceptions of the general economic situation over the past year increased six points to -52. People’s view of the economy over the coming year also improved, rising three points to -30.

“An optimist would be tempted to look at the past 12 months and note that the trend of the overall index score is firmly up,” Staton tells Marketing Week. “In September 2022, the headline score was -49; now this August it’s -25. Yes, there were two months when it slipped but the underlying trend is improving. A pessimist might say there’s a long way to go but there are reasons to be positive with higher sub-measures across the board this month.”

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People are also more positive about their ability to save, with the savings index rising one point to 27. While this doesn’t contribute to the overall index score, it does show a positive trend as this has steadily risen from 18 in August 2022.

“Marketers must remain optimistic and stay nimble, taking care to understand market dynamics and to keep responding with smart brand strategies that keep the consumer in mind. If optimism is power, so too is a strong brand, especially in times like these” Staton concludes.

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