Consumer Confidence Appears Shaky for 2019

Wide-ranging economic indicators flavour the way people think about money. As global and national conditions come home to roost in UK households, it colours residents’ feelings about their future financial prospects. When good news is present, optimism often spikes, making families feel positive and secure about days to come. But when negative economic news prevails, it can have the opposite effect, souring personal finance perspectives across the country.

General financial sentiment among Britons is an important thing to consider, because it provides clues into how people are handling money and how their spending habits may look in the future. Studying prevailing conditions helps analysts identify trends and make predictions, but the actual insight shared first-hand by surveyed citizens can provide an even more accurate analysis.

Recent survey results shared on shed light on the current state of consumer confidence, illustrating a relatively weak set of financial expectations for the coming year.

Bright Spot Emerges Around Perception of Easing Inflation

HIS Markit recently sponsored a consumer confidence study, polling 1,500 adults about finance and economics. The results point to uncertainty and angst about personal financial matters in 2019. Despite the gloomy outlook, the survey did have a bright spot. It appears UK consumers are upbeat about the cost of living, providing some near-term optimism.

According to the IHS Markit monthly Household Finances Index, households maintain a hopeful position about inflation, perceiving that their actual living costs are rising at the slowest pace in more than two years, since October, 2016. As a result, the Index reached a three-month high in January.

The near-term optimism shared by survey respondents is supported by inflation data. The official metric assessing consumer price inflation indeed dropped to its lowest level in nearly two years. December’s inflation measured 2.1 per cent.

Household Worry Persists Amid Brexit Uncertainty

In contrast to their positive feelings about waning inflationary pressure, Britons surveyed for the IHS Markit study indicated noted reservations about their financial prospects for the duration of 2019. Respondents’ expectations for the coming year were close to the lowest level seen since 2014. Of particular concern, the downbeat attitude appears to be a reaction, in part, to the uncertainty surrounding the UK’s pending exit from the European Union.

As the move approaches, with many unanswered questions still plaguing the process, worries about job security are striking fear within British households. According to one HIS Markit economist, the political deadlock associated with a turbulent Brexit transition are adding fuel to an already unsteady monetary environment, affecting British families. Despite financial worries, households have access to credit, including online loans that fund quickly, without time-consuming credit checks. But in the wake of Theresa May’s parliamentary defeat over Brexit planning, UK families remain tentative about their personal finances. With only a couple months left, leading up to the late March departure, the possibility remains strong that Brexit may happen without a formal agreement in place, protecting trade and normalised relations across borders.

No Help From House Prices

Complicating job security worries, which have fallen to a near one-year low, the steep drop in house price expectations experienced in December did little to temper consumer angst. Rightmove house price predictions are flat for 2019, and the property website recently shared figures illustrating the worst start to the year for asking prices in seven years, dating all the way back to 2012.

In addition to other data about consumers’ overall view of the economy this year, 1,500 respondents also shared their beliefs about future interest rates. Among those surveyed, a majority are under the impression the Bank of England will proceed with an interest rate rise during the first half of 2019. And nearly three-quarters of IHS Markit survey participants believe an interest rate hike is inevitable, before the end of the year.

Various influences impact the way consumers think about the economy. When all the factors are considered, Britons’ resulting views illustrate a general level of confidence (or lack thereof) in future financial conditions, which in turn affects the way they handle their money. Consumer confidence is an important indicator, because it projects potential spending and other monetary outcomes, providing a glimpse into the future. A recent study polling 1,500 consumers returned generally dismal results, indicating many UK families are pessimistic about their financial prospects in the coming year.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

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