GfK’s Consumer Confidence Barometer has been measuring UK consumer sentiment for seven decades. This accurate bellwether of economic sentiment has been leading the charge for more than 50 years. This rich history provides an enormous advantage in understanding the complexities of today’s economic climate. More than a few of the indicators out there suggest a seeping loss of confidence. The new monthly data doesn’t support the worst-case recession scenarios. Rather, they uncover new layers of consumer sentiment along demographic lines as we’ve seen polarized by politics—especially highlighted by political polarization and age divides.
Yet even as the UK’s economy seems relatively healthy, hope is still proving to be a mirage. According to the Consumer Confidence Barometer these confidence levels will continue to trend together through at least 2024. The new, granular data you’ve been collecting tells you a different story. According to the latest figures, the doomsayers’ prediction of an economic disaster are as far-fetched as ever. The role of politics Politics is one of the biggest drivers of consumer sentiment. In the own US, we find that economic optimism largely follows party lines — with the Democratic Party in power.
Combined with sudden and dramatic changes in government policy and economic circumstances, these actions have caused a severe crisis of confidence among consumers. The last 45 days have undoubtedly raised fears with all of the political turmoil. As inflation trends downward towards a government target of 2%, measures to control regulated price increases for essential services like rail and water are being implemented. Together, these efforts are focused on getting consumers to trust the economy again.
For example, the U.K. context Liz Truss’s disastrous mini-budget late last year wreaked havoc. It was a watershed shift for consumer confidence for Americans of all ages. That one financial misstep sent shockwaves across the entire global economy. It reinforced the years-long drop in perception that began with the Brexit vote and accelerated through the pandemic. Our older citizens, particularly those over 50 and pensioners, are profoundly despondent about the economy. This attitude leads them to delay spending, resulting in a drag on GDP growth.
Unlike older generations, a narrative shift is happening to younger demographics. Many young people, particularly those aligned with liberal ideologies, report feeling more optimistic following a series of crises earlier this decade. Collectively, the hope of a more responsive government thanks to their overwhelming support in 2024 elections has increased their economic confidence. They feel better about their financial future as a direct result.
The disparities between age groups are stark. When older people are reluctant to spend, they aren’t just hesitation—they’re suddenly defensive. Younger consumers are all-too-ready to flock towards more economic prospects. This wide generational divide in consumer behavior leads to worrying questions about what that means long-term for the UK’s economy. If older Britons stay nervous, their unwillingness to open their wallets may keep the economy from bouncing back.
Painful inflation and rising pay in particular are driving the remarkable consumer mood. Overall, wage increases have exceeded inflation rates, providing working people with necessary relief as they face an increased cost of living. This additional financial cushion may be able to help jumpstart consumer spending habits among all demographic groups, only if consumer confidence can be regained.
External factors complicate the landscape further. It can trigger strong emotional reactions. Social media has a strong power over our emotions. By promoting harmful or misleading content, algorithms can exacerbate users’ sense of hopelessness and anxiety. Add to this the often toxic atmosphere of doom-scrolling and a pervasive sense of economic malaise, and a culture of pessimism easily takes root.
The landscape is made all the more challenging by the reality that older consumers are experiencing another confidence collapse. At a time when millions are understandably scared of the new economic reality, their unwillingness to spend makes policymakers’ attempts to invest in economic recovery even harder. On the flip side, younger generations seem to be hardier, looking for glimmers of hope even while clouds of uncertainty remain.