Burnham bounce risks deflating unless focus remains on struggling households
Andy Burnham's return to Westminster politics has lifted UK consumer confidence, but the 'Burnham bounce' risks deflating unless focus remains on struggling households. The poorest fifth of households have suffered a decline in savings, and consumer spending has suffered …
Intelligence analysis by Llama
The 'Burnham bounce' may be short-lived unless the focus remains on struggling households. Consumer confidence has improved, but the poorest fifth of households have suffered a decline in savings, and consumer spending has suffered due to high inflation and interest rates.
Imagine you're a consumer in the UK, and you're trying to decide whether to spend your money or save it. If you're one of the poorest households, you might be worried about the economy and your own financial situation. But if you're one of the richest households, you might be more optimistic about the future. The 'Burnham bounce' is a recent improvement in consumer confidence, but it's not clear whether it will last. If the focus remains on struggling households, it could lead to a sustained turnaround in consumer confidence.
Analysis
A 'Burnham Bounce' in Consumer Confidence
The recent data from GfK suggests that Andy Burnham's return to Westminster politics has lifted UK consumer confidence at its fastest monthly pace for almost three years in June. The lion's share of the improvement was driven by how consumers viewed the prospects for the British economy, with a 10-point advance in how they felt about the past year, and an eight-point gain for the next 12 months. However, this 'Burnham bounce' may be short-lived unless the focus remains on struggling households.
The Poorest Fifth of Households
The GfK data reveals that the poorest fifth of households have suffered a decline in savings. This is not surprising, given the high inflation and interest rates that have been driven by the Bank of England to combat the inflationary splurge. The average consumer price level has risen by more than a quarter since the onset of the cost of living crisis in late 2021, with some categories, including food and energy, rising by significantly more. The Bank of England's actions have heaped pressure on borrowers, and a large group of older Britons are mortgage-free, and so have been more insulated.
Consumer Spending
Consumer spending has suffered due to high inflation and interest rates. Official figures show consumer-facing services output remains about 6% below its pre-pandemic level. Travel agents, food and drink, and hoteliers are among the hardest hit. The counterpoint to the spending weakness has been a high household saving ratio, which measures the proportion of disposable income left unspent. At 8.9%, it is currently among the highest levels in a decade. However, not everyone was in a position to squirrel away money. Bank research shows the highest 40% of earners and retirees saved the most, while the poorest fifth of households suffered a decline in savings.
Key points
- The 'Burnham bounce' has lifted UK consumer confidence at its fastest monthly pace for almost three years in June.
- The poorest fifth of households have suffered a decline in savings.
- Consumer spending has suffered due to high inflation and interest rates.
- The household saving ratio is currently among the highest levels in a decade.
- The focus needs to remain on struggling households to achieve a sustained turnaround in consumer confidence.
If the focus remains on struggling households, it could lead to a sustained turnaround in consumer confidence. This could be achieved through policies that support the poorest fifth of households, such as increasing the minimum wage or providing more affordable housing.
The 'Burnham bounce' may be short-lived unless the focus remains on struggling households. If the focus shifts away from these households, consumer confidence may decline, leading to a decrease in spending and a further decline in the economy.
