Consumer confidence on a slight New Year downswing amid Omicron uncertainty

Consumer confidence on a slight New Year downswing amid Omicron uncertainty

• Consumer confidence declines by -0.5 points in December 2021
• Business activity measures for past month (-3.3.) and next 12 months (-2.4) both worsen
• Britons report that their household finances improved over the past month, but grow more pessimistic about the year ahead
• Home value outlook rises to highest level since May 2017 (+3.0)

After a brief festive reprieve, consumer confidence resumed its downward trajectory in December 2021, according to the latest analysis from YouGov and the Centre for Economics and Business Research (Cebr).

The index saw a decline of -0.5 points, falling from 110.5 to 110. While not a dramatic drop (and still positive overall), it does suggest that the Omicron variant of COVID-19 (and accompanying uncertainty around the new strain’s severity and the need for new restrictions) had an immediate impact on public optimism in the closing weeks of 2021.

YouGov collects consumer confidence data every day, conducting over 6,000 interviews a month. Respondents answer questions about household finances, property prices, job security and business activity, both over the past 30 days and looking ahead to the next 12 months.

Business activity saw the most significant drops among all underlying measures (although again, with scores remaining positive overall). Each month we ask employees whether they believe the levels of activity at their place of work will get better or worse. With Omicron infections affecting staff availability for businesses across the country, this metric took a hit of -3.3 points – deteriorating from 115.0 in November to 111.7 in December. This may have also lead to a broader cynicism towards the year ahead, as outlook worsened, falling from 127.1 to 124.7.

December also brought a halt to the upward trajectory of both job security metrics. At 119.1, outlook saw a slight decrease compared to November (-0.3). But (and again, we may have to attribute this to Omicron’s impact on workplaces) perceptions of job security over the past month fell by -1.8. The government announced support packages for businesses most impacted by the (then-emerging) coronavirus variant in mid-December – but we may have to wait until the next update to see whether this has done anything to assuage employer/employee fears.

In any case, the December update is not all doom and gloom among those who consume. While the public’s optimism about their household finances inched downwards from 84.6 to 83.6 (-1.0), they were also more likely to report that their short-term financial situation had improved: scores for the past 30 days saw a very slight uptick from 83.2 to 83.7. This is still firmly negative, but this metric has never entered positive territory in the entire, nearly decade-long history of the Consumer Confidence Index.

The happiest consumers in this edition of the study were homeowners. After seeing a small increase between October and November, perceptions of house value over the past 30 days rose 1.2 points between November and December from 126.2 to 127.4. And, at a time when house prices are rising at the fastest pace since 2007, it may not be particularly surprising that outlook for the year ahead jumped almost three points from 132.7 to 135.6.

Darren Yaxley, Head of Reputation Research at YouGov: “While many wanted 2021 to end on a high after the difficulties of the past two years, it's clear that Omicron dampened consumer confidence. Both the backward- and forward-looking business activity and job security metrics fell and, crucially, the household finance measures are notably below where they were this time last year. However, it is not all doom and gloom - the house price scores continue to gain strength and while many measures have fallen, they have declined by more modest amounts than at other phases of the pandemic and most are still in positive territory.”

Kay Neufeld, Head of Forecasting and Thought Leadership at Cebr: “The UK economy faced some significant headwinds towards the end of last year, due to the combination of quickly rising inflation, supply chain bottlenecks and the rapid spread of the Omicron variant. The fall in consumer confidence in December was broad based, with the largest contribution stemming from a drop in the backward-looking business activity measure. The high number of new Covid-19 infections in December and the associated uptick in people required to self-isolate have likely contributed to this as businesses experienced widespread staffing shortages. A small improvement in the household finance metric looking at the past 30 days is welcome, though with the cost of living set to climb further we expect this to be short lived.”