Merryn's Blog

A growing crisis in confidence

The Nationwide Consumer Confidence index is now at its lowest level since May 2009. That could mean stockmarkets are heading for a major pullback.

The Nationwide Consumer Confidence index does what it says on the tin. Each month, it measures the UK population's view about the country's current position and its future prospects. It also gauges how upbeat Britain's consumers are about their own finances.

What's the latest?

It makes painful reading. July's overall consumer confidence figure fell for the third month in a row to its lowest level since May 2009. Even worse, the Expectations index, which looks forward six months, has plunged to its weakest since last April.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

"July will have been a time for many to reassess their individual circumstances following the Chancellor's emergency Budget", says Nationwide's chief economist, Martin Gahbauer. "There appears to be growing concern among consumers as to their level of disposable income in the months ahead".

With prices rising too fast for comfort as well, this suggests lots of Brits will soon be running low on cash. That'll be bad for general retailers in fact for any companies that depend on consumer spending.

Advertisement
Advertisement - Article continues below

What does this mean for the UK stock market?

The chart below shows the Nationwide Consumer Confidence index, advanced by one month, compared with the FTSE 100 index.

10-08-11-NWconfidence

Source: Bloomberg

Sure, the FTSE 100 contains plenty of firms that get much of their business from outside Britain. So they ought not to be too badly hurt by a UK domestic-spending slowdown.

But look how the Nationwide index has pointed the way for UK shares since the financial crisis started over three years ago. Plummeting consumer confidence has clearly hit the market's self-belief too.

On this measure, the FTSE could soon suffer a major pull back.

Advertisement

Recommended

Visit/519858/how-long-can-the-good-times-roll
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Visit/516758/beyond-the-brexit-talk-the-british-economy-isnt-doing-too-badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Visit/economy/uk-economy/600645/take-a-punt-against-businesses-with-remainer-ceos
UK Economy

Take a punt against businesses with Remainer CEOs

Prominent EU supporters’ faulty reasoning is a liability for their businesses, says Matthew Lynn. Sell their shares short.
19 Jan 2020
Visit/economy/uk-economy/600644/dominic-cummings-the-weirdos-take-back-control
UK Economy

Dominic Cummings: the "weirdos" take back control

The prime minister’s special adviser is planning big changes in the way the government machine works. What can we expect? Simon Wilson reports.
18 Jan 2020

Most Popular

Visit/economy/600632/money-minute-friday-17-january-uk-weakness-likely-to-continue
Economy

Money Minute Friday 17 January: UK weakness likely to continue

Today's Money Minute previews UK retail sales figures the UK, inflation data from Europe and industrial production from the US.
17 Jan 2020
Visit/investments/property/house-prices/600638/uk-house-prices-may-be-heading-for-a-boris-bounce
House prices

UK house prices may be heading for a Boris bounce

The latest survey of estate agents and surveyors from the Royal Institution of Chartered Surveyors is "unambiguously positive" – suggesting house pric…
16 Jan 2020
Visit/520525/currency-corner-how-high-can-the-pound-go-against-the-euro-in-2020
Currencies

Currency Corner: how high can the pound go against the euro in 2020?

In the month in which we should finally leave the European Union, Dominic Frisby takes a look at the pound vs the euro and asks just how high sterling…
13 Jan 2020
Visit/investments/stocks-and-shares/share-tips/600636/class-acts-going-cheap-buy-into-europes-best
Share tips

Class acts going cheap: buy into Europe’s best bargains

Value investing appears to be making a comeback, while shares on this side of the Atlantic are more appealing on metrics such as price/earnings ratios…
16 Jan 2020