“Mintel’s consumer confidence data shows that the economy only has, at best, an indirect impact on sentiment. When the UK economy was outperforming most of its peers, many people were still pretty wary. However, in 2016 sentiment has continued to trend upwards, despite disappointing growth in the economy as a whole. April’s figures dipped slightly, but people are still more positive than there were for most of 2015.
What’s really interesting is the potential impact of the EU Referendum. Looking back at Mintel’s data around the time of the Scottish Independence Referendum and, later, around the General Election, Mintel’s data suggests that the uncertainty associated with these events has the potential to undermine confidence, but that sentiment strongly rebounds when the uncertainty is resolved. A “remain” vote could well boost confidence, even if there is no underlying improvement in the consumer economy.”
– Toby Clark, Director of Research, EMEA

Sentiment is still trending upwards…

Many people are feeling the benefit of a relatively benign economic environment. Inflation’s relatively low, interest rates are low, unemployment continues to trend downwards, homeowners continue to benefit from rising house prices, and wages are still increasing. This is slowly feeding through into consumer sentiment, and confidence has been gradually trending upwards for some time now.

25% of respondents say that they have enough money left at the end of the month for a few luxuries or to add to their savings, compared to just 2% who say that they are in trouble. The recovery is still unevenly distributed, and concentrated among higher earners and homeowners, but the broad direction of travel is still positive, despite the economic headwinds.

…but there was an April wobble

Although the medium-term trend is positive, some of Mintel’s measures of consumer confidence did drop slightly in April. It’s important not to read too much into a single month’s data: any consumer research is subject to some variability. However, as well as the comparatively slow growth in the broader economy, there were a number of short-term factors that may have coloured consumers’ opinions.

One factor is that the research coincided with high-profile coverage of Tata’s threat to close its UK steel operations. Although relatively few respondents will have been directly affected, it still shifted the media’s focus onto the state of the UK’s economy. Notably, in Wales, where the story will have had the most resonance, sentiment was particularly negative. 21% were “really worried” about their financial prospects over the course of the coming year, compared to 15% across the sample as a whole.

Possibility of a post-referendum bounce?

Mintel strongly believes that people place much more weight on their own financial situation than the “big picture” economic news, but high-profile coverage of negative economic stories can still contribute to a general sense of insecurity.

By far the biggest story in the UK in spring and early summer is the EU Referendum, and past experience suggests that this will be having an impact on consumer sentiment. As seen in the Scottish Independence Referendum and the General Election, one of the central themes of the campaign has been how the outcome could affect the UK’s economy.

Tracking back through Mintel’s consumer data gives an indication of what this could mean for consumer confidence. Probably the closest equivalent is the Scottish Referendum. Just as in the EU Referendum, one side pushed the advantages of national self-determination, while the other concentrated on the economic benefits of the Union, and the potential threat to jobs and livelihoods if voters opted to leave.

In Scotland, consumer confidence was noticeably lower than across the UK as a whole in the run-up to the Independence Referendum. Crucially, though, as soon as the result was clear, there was a significant bounce in sentiment. In October 2014, Scots were actually more optimistic about their finances over the coming year than the nation as a whole. There was a similar (albeit short-lived) bounce in confidence across the UK after the outcome of the General Election was announced.

Of course, consumer sentiment is influenced by many factors, and it’s impossible to isolate the impact of one particular issue. But past data does tend to support the idea that uncertainty can hold back confidence, and that sentiment rebounds once that uncertainty is resolved. Combine that with the mood-lifting effect of Euro 2016, and there’s potential for a strong summer uplift in sentiment.

Key economic indicators

Figure 1: Key economic indicators, May 2016
Period Value
Annual GDP growth Year to Q1 2016 +2.1
Unemployment rate February 2016 5.1
CPI April 2016 +0.3
Annual change in average weekly earnings (including bonuses) February 2016 +1.8
Bank of England Base Rate May 2016 0.5
Annual change in house prices (Land Registry) February 2016 +7.6
: : :
Source: Office for National Statistics, Bank of England, Land Registry
Back to top