Consumer’s willingness to part way with their money remained mostly stagnant in July according to GfK’s Consumer Confidence Barometer. The study, which has been surveying consumers since 1974, tracked a 1-point increase to -13 compared to the prior month. Whilst this represents a 17-point climb compared to July 2023, it suggests that consumers are showing more restraint than they did in the previous quarter.
How consumers view both their personal financial security and broader economic stability can cause significant challenges for brands. This is often through a reduction in demand, prolonged buying cycle, or a reliance on discounting. Here we will outline the key takeaways from the recent study and explore the potential impact on brands in the short-term.
Key takeaways from the study:
- Overall consumer confidence has increased by only 1-point when compared to the previous month. This represents a significant 17-point improvement when compared to the previous year, when interest rates hit 5% for the first time since the 2008 financial crisis.
- These findings suggest that consumers are showing more restraint with spending than they did in Q2. Throughout Q2 the overall consumer confidence grew by an average of 2.3-points per month, although we cannot anticipate Q3’s overall performance based upon this limited data.
- Whilst consumer’s confidence in their personal financial situation has increased by 2-points since June, there has been no shift in their view of the general economic situation. This suggests that despite a General Election resulting in a change of Government, most are taking a ‘wait and see’ approach.
- Consumers are showing a noteworthy 7-point climb in their enthusiasm for major purchases. This implies that whilst consumers are showing constraint, this is having a greater impact on typically impulsive low-value purchases (i.e. clothes) rather than often considered high-value purchases (i.e. furniture).
The impact on brands:
- It’s possible that brands selling more considered products or services may face fewer challenges to scale revenue. At the same point, those selling more impulse-led products or services may experience more challenges to achieve the same. But it should be noted that this study looks backwards, and its findings may not represent the mood moving forward.
- Whilst the previous quarter saw month-on-month improvements in consumer confidence, the latest data suggests a lull in this trend. Whilst this may be a result of events such as the General Election, all brands should be mindful that most sectors remain challenging as personal finances adapt and recover.
- GfK’s update on the 23rd August is likely to shed light upon the impact of recent drops in inflation, a newly elected Government, and a potential change in interest rates in early August. As the interviews for this study were conducted between June 28th – July 12th, many of these events will have had a negligible impact on the responses given.
Whilst analysing shifts in consumer confidence over a short timespan can prove feeble, this study from GfK may provide us with the first indication of performance heading into the second half of 2024. We will publish further articles at the point when future updates of the GfK Consumer Confidence Barometer are shared.
