Low consumer confidence may be about to improve

Although it increased slightly this month, consumer confidence in Britain has now been net negative for an entire decade. The headline measure, published by GfK, stood at minus-16 in January, up one point since December and seven points from a low of minus-23 last April.

When you bear in mind that this period included the Brexit vote, the dog’s breakfast of a process of implementing Brexit, the Covid pandemic, Liz Truss’s car-crash economic policies, the cost of living crisis and the miserable vibe that has accompanied the present Labour government almost since day one, perhaps this persistent net negativity of British consumers is unsurprising and destined to continue indefinitely.

Yet there is a glimmer of hope in the latest consumer confidence data, which asks several sets of questions, two of which are now eliciting distinctly different answers. One of these explores how confident people are about the general economic outlook for the next 12 months. In January, confidence deteriorated by two points to minus-31. The other set probes how confident consumers are about their own personal finances in the year ahead. The net answers here are firmly in positive territory, at six points, up by four in January alone.

Perhaps this inconsistency reflects consumer over-optimism about personal finances. Maybe a depressed outlook on the economy is now locked in to the national character and is impervious to any evidence that the economy is getting better (which, actually, it probably now is, on the balance of several key indicators).

Historically, consumer confidence in the economy has tended to be a lagging indicator that follows behind improvements in consumers’ confidence in their personal finances. If that remains true, and the economy turns round, then expect the overall consumer confidence number soon to start rising rapidly. Fingers crossed.

Photograph: Mike Kemp/In Pictures via Getty Images