03 July 2000

European market research group GfK reports a sharp decline in UK consumer confidence in June. Following a six point increase in May, June’s indicator fell by two points to a score of zero, although GfK attributes this to a natural readjustment and seasonal effects.

"(May's) rise was due, at least partially, to a seasonal effect which routinely impacts at this time of year and leaves confidence artificially high," said the researcher, which conducts the ongoing survey for the European Commission. “Therefore, the most likely explanation for this month's fall in consumer sentiment is that it represents a natural readjustment as the optimism which traditionally accompanies the arrival of summer gradually erodes."

Confidence in personal finances improved significantly in May, although this was not necessarily good news for hard pressed retailers. The number of consumers who thought the time was right to make a major purchase fell 3% in June from the preceding month, while the number of people likely to spend more on major purchases over the coming year also dropped 3%. "The good news for retailers is that those with the most expendable income [annual earnings over £25,000] intend to increase their expenditure over the coming year," said GfK.

A similar scenario was spelled by the latest figures for credit and debit card spending. According to the Credit Card Research Group, shoppers reined-back card spend in May after a free-for-all in the preceding three months. Spending growth slowed to just 16.2% in May, compared with 29.1% in April and 24.4% in March – one of the highest periods of year-on-year growth on record.

However, CCRG acting-director Kathy Lewis says that May’s downward trend is not expected to signal a longer term downturn in card spending: "Although this month's growth rate is slightly down on the last three months it is only marginally lower than the 17% average we saw in 1999. The CCRG expects spending to pick up in June."

News source: BBC Online Business News (UK)