Consumers say they’re more confident – but will they actually spend?

              

 

This is an abbreviated article by Liz Barclay – read the full article at Business111.com/news

Britain’s consumers are apparently feeling their most confident for more than two years, but another survey says they’re getting more worried about their finances and planning to spend less in the shops. Both can be true, and that’s the problem for small businesses trying to decide how much stock to order, whether to hire, what to charge and whether it’s finally safe to invest. Forget the headline confidence number: what matters to a small business is whether customers actually open their wallets.

GfK’s latest Consumer Confidence Index rose another point to minus 13 in September, its highest level since August 2024 and the third consecutive monthly improvement. People reported greater confidence about their personal finances and the wider economy, although the overall index remains firmly negative.

Yet the BRC-Opinium survey published at almost exactly the same time tells a rather different story. Expectations for the economy fell from minus 28 to minus 34, expectations for personal finances dropped from minus 9 to minus 15 and expected retail spending slipped from plus 8 to plus 5. Overall spending expectations remained unchanged.

HOW CAN BOTH BE RIGHT?

Different surveys ask different questions and measure different things. GfK looks at people’s personal financial circumstances, their view of the economy and whether they think now is a good time to make major purchases. BRC-Opinium tracks people’s feelings about their finances and the economy alongside what they expect to spend over the coming months.

That’s an important distinction for small businesses. People can feel slightly more optimistic about the future while simultaneously deciding that now isn’t the moment to buy a new television, eat out twice a week or replace the sofa.

Timing matters too. The BRC-Opinium research was conducted between 8 and 11 September, while GfK’s September survey covered 1 to 18 September. In an economy where energy, fuel and geopolitical developments can move quickly, even a difference of days can affect what people tell researchers.

WATCH CUSTOMERS, NOT JUST SURVEYS

Small businesses need to pay attention to what their own customers are doing. Is footfall increasing? Are average transaction values rising? Are customers buying premium products or trading down? Are enquiries becoming orders or disappearing when the price is mentioned?

Those numbers can tell a five-person business considerably more about its immediate prospects than a national confidence index. A retailer seeing customers spend less shouldn’t order substantially more stock simply because a national survey says confidence has increased.

Pricing needs the same caution. If customers are becoming more price-sensitive, promotions, bundles or different product sizes might work better than across-the-board discounting that destroys margin.

DON’T CONFUSE CONFIDENCE WITH CASH

There is another interesting development. Bank of England figures released this week show unsecured consumer credit growing at its fastest annual rate since records began in 1993, while mortgage approvals fell to their lowest level since December 2023. That doesn’t tell us precisely why households are borrowing, but it adds another complication to the picture of apparently improving confidence.

Meanwhile inflation expectations are moving in the opposite direction. Citi/YouGov’s September survey found households expect inflation of 4.5% over the next 12 months, up from 3.9% in August.

Consumers may therefore be feeling better today while worrying about what happens to their bills tomorrow. That’s hardly the foundation for a spending boom.

PLAN FOR CAUTIOUS OPTIMISM

For small and micro businesses, the sensible conclusion isn’t that confidence is booming or collapsing. It’s that the consumer remains difficult to read.

Businesses should therefore avoid making big decisions from one month’s survey. Watch your own sales, enquiries, average transaction value, cancellations and customer behaviour alongside national data, and update forecasts frequently rather than relying on assumptions made months earlier.

The latest figures offer grounds for cautious optimism, but that’s very different from predicting strong demand. Customers may feel slightly better without feeling wealthy enough to spend freely, particularly if energy and fuel costs continue rising.

For a small business, the most useful consumer-confidence survey is ultimately the one conducted every day at its own till, website, order book or appointment diary. National surveys tell you how people say they feel; your sales figures tell you what they’re actually doing.

This is an abbreviated article by Liz Barclay – read the full article at Business111.com/news

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