Phillip Inman Economics correspondent 

Consumer and business confidence tumbles in November, surveys find

Consumers view economy with increasing despondency as businesses worry recovery after Brexit vote is starting to recede
  
  

A storage area in Kent for cars awaiting delivery
A storage area in Kent for cars awaiting delivery. The GfK index shows a sharp drop in consumer plans for large purchases. Photograph: David Goddard/Getty Images

Consumer and business confidence tumbled in November amid concerns the UK economy would struggle to grow after a post-referendum slowdown, two surveys have found.

Consumers were “resolutely gloomy” and viewed the economy with increasing despondency, while a broad range of businesses said they were worried the economic recovery after the Brexit vote was starting to recede.

Conducted before last week’s autumn statement, the surveys support the chancellor’s warning that the UK was likely to confront “a sharp challenge” in 2017, as inflation eats into disposable incomes and limits consumer spending.

The GfK consumer confidence index dropped five points after a two-point fall in October, taking it to minus eight.

Despite recent strong retail sales, the index revealed a sharp nine-point drop in consumer plans for large purchases, spelling bad news for retailers as they gear up for the peak Christmas selling period.

Car sales have dropped in recent months, and a further fall is expected as consumers shy away from committing themselves to purchasing major items while the impact of the referendum remains uncertain.

Howard Archer, chief economist at IHS Global Insight, said: “The fundamentals for consumers seem certain to progressively weaken over the coming months, which will take a significant toll on confidence as well as ability to spend. It looks probable that inflation will move above earnings growth during 2017.

“Additionally, we suspect that unemployment will rise over the coming months as economic activity weakens appreciably and business uncertainties are stoked by the government triggering article 50, thereby bringing likely difficult negotiations with the EU to the forefront.”

The index, compiled on behalf of the European commission, showed a two-point drop in confidence about respondents’ personal finances over the past year and a four-point fall for the same measure looking to the year ahead.

Questioned about their view of the general economic situation, respondents were disappointed with the last 12 months and circumspect about the next. The index covering most of 2016 dropped six points – 19 points lower than this time last year – and fell five points for the year ahead.

Joe Staton, head of market dynamics at GfK, said: “The slump across the board this month points to continuing uncertainty about the state of the economy among consumers.

“We are viewing our economy over the past 12 months with increasing despondency. The decreasing score on the economy for the next 12 months also shows we are resolutely gloomy about the outlook despite strong GDP numbers.”

He added: “Many are saying that fears about the British economy have been overstated but time will tell if the pessimism shown in the index is misplaced or not.”

UK business confidence levels decreased by five points in November, according to the business barometer compiled by Lloyds Bank Commercial Banking. This came after a six-month high in October.

Lloyds said the decrease followed “a significant decline in economic optimism, which fell 20 points to 14% from 34%, suggesting that the recovery following the EU referendum outcome is starting to recede”.

It said firms’ reported theirown business prospects had improved to the highest level since January.

“This was driven by 55% of firms who said that they expect their business prospects to improve in the coming year, while only 5% reported a weaker outlook,” the bank said.

Consumer services businesses were more optimistic than consumers, with a balance of 36% expecting a brighter year ahead compared with 25% last month.

However, the business and other services sector fell by 17 points to 29%.

 

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