A figure on July’s consumer confidence in the UK market published by the GfK group this morning showed discouraging levels of consumer pessimism.
The figure came in at -12, representing an 11-point reduction from the previous month. It also presents the lowest level the index has taken since December 2013 and the greatest one month drop the index recorded since March 1990 when Margaret Thatcher hiked interest rates to 15%.
The figure also missed analyst estimates by 4 points meaning that the index dropped 57% further than expected.
June’s figure, which was published only 5 days after the UK’s decision to leave the European Union was made, could only reflect little of the impact the political move had on consumer sentiment. However, this month’s shockingly low level shows the first indication of the full impact Brexit may have on the economy over the coming months.
Consumer confidence is a good indicator for GDP growth rates in the coming months and current levels indicate that UK growth is likely to reduce greatly due to lower consumption activity in the markets. The figure adds to a growing herd of UK data which suggests that the country may be entering a longer period of recession due to economic uncertainty post-Brexit.
The BoE earlier this month decided to refrain from introducing stimulating measures at this point in time to wait until the impact of Brexit on the wider economy becomes more clear. The next policy meeting is scheduled for the coming week and amid the new influx of new post-Brexit economic data it is becoming more likely that the BoE is set to act by introducing new stimulus.