British consumer confidence fell sharply in November, a sign that overall pessimism was still dominating the outlook following the June 23 Brexit vote.
GfK’s long-running consumer confidence index declined by five points to -8 in November, after falling 2 points to -3 the month before. A median estimate of economists anticipated a fall to -4. Anything below 0 indicates pessimism.
“The slump across the board this month points to continuing uncertainty about the state of the economy among consumers, Joe Staton, head of Market Dynamics at GfK, said in a statement.
Consumer confidence returned to pre-Brexit levels in September, with the GfK index experiencing its biggest monthly increase since June 2015. Consumer confidence plunged following the referendum to levels not seen since late 2013.
Confidence among consumers is closely watched by the financial markets because it has direct implications on spending, which drives most advanced industrialized economies. However, so far Britain hasn’t witnessed a spending drag as a result of the referendum vote. The complete opposite has occurred, with October retail sales growing at the fastest annual pace in 14 years.
UK retailers have also been helped by a weaker pound, which has served as a magnet for international tourists. Just last month, the pound reached its lowest level in 168 years against a basket of competitors, highlighting the turmoil the currency has faced over the past five months.
The retail boom is likely to come to an end next year, according to new research from forecasting service the Economic Intelligence Unit. In a recently published study, the group said retail sales volume will fall 1.8% year-over-year in 2017, putting the UK among the five worst performing retail markets in the world. The only markets expected to perform worse are Venezuela, Hong Kong and Ecuador.
“Fallout from the Brexit vote, and potential for further political upheaval in European elections will weigh on consumer confidence in 2017 leading to virtual stagnation in regional sales volumes,” Jon Copestake, analyst at the Economic Intelligence Unit, said.
“The UK could be hit particularly hard as the decision to leave the EU sinks in and a weak pound pushes up prices.”
The British government’s Brexit timeline was scheduled to begin at the end of the first quarter. However, a recent High Court ruling stipulated that Brexit will require a vote in Parliament before moving forward.
Prime Minister Theresa May has vowed to challenge the ruling in order to proceed with her original timeline. Legal experts suggest she has a slim hope of reversing the High Court ruling.