News International Commercial has released findings from the latest wave of Consumer Eye, its quarterly consumer confidence survey.

The survey looks at consumer confidence across NI Commercial's UK HeartBeat Panel (Sun/News of the World readers) and their Premium Panel (Times/Sunday Times readers). 

Consumer Eye has been an important source of information for NI Commercial's clients and agencies since its launch in December 2008.

Latest findings

Personal finance:

Consumer confidence in overall personal financial situation has edged further downwards in Mar-11 and is now at its lowest point since Dec-08.  The overall confidence index stands at -39, down -4 points from Dec-10.  Although, Sun/News of the World readers (-44) are less confident than Times/Sunday Times readers (-35), we have seen a -8 point decline in Times/Sunday Times readers confidence index from Dec-10.  

Food:

Rising food prices, economic uncertainty, VAT increase and the government spending review is having a far greater impact upon the more affluent households and as the economic recovery continues to stall, consumer confidence amongst our premium audience may fall below that of Sun/News of the World readers.

Retail:

With YoY like-for-like retail sales continuing to decline, we may see confidence in consumers’ overall personal financial situation follow suit, although at a far lesser rate.  However, much of how people feel about their own personal financial situation is dictated by the performance of the economy.

The economy:

UK real GDP contracted by -0.5% in Dec-2010, a figure far worse than expected by the Treasury, but bounced back to +0.5% growth in Q1 2011.  Despite the increase in GDP for Q1 2011, consumer confidence towards the state of the economy has taken a -7 point decline to -57 in Mar-11, although this is still ahead of two years ago when the confidence index stood at -81 in Mar-09. 

Property:

As of March, house prices registered a YoY decline of -2.9% on the Halifax index, but current price falls are much more moderate than those seen in 2008.  Our consumer confidence index on house values robustly tracks house price growth data.  Although we have seen a sharp decline in confidence in house values since Jun-10, confidence still remains far more positive compared to Dec-08, although it still remains negative at -29.  If the base rate, currently at 0.5%, were to rise then the decline in house value confidence would intensify.

Inflation:

Inflation has continued to increase and remains above the Bank of England’s 2% target.  The most significant upward drivers of inflation are global commodity prices, particularly oil and food, and the increase in VAT in January 2011.  The biggest price increases have been in the transport sector, which are further pushing up food prices and eroding confidence in grocery costs.  Confidence in grocery costs are at their lowest ever point at -69 and are likely to increase further as oil and consequently food prices rise.

Fuel cost:

Oil reached $115 per barrel in Mar-11, the highest since the price spike of Summer 2008.  This is partly due to instability in the Middle East as well as strong demand from emerging markets.  From our Consumer Eye, we’ve seen that as the oil price increases, confidence in both fuel costs (-81) and utility bills (-67) have decreased.  Although we have seen a slight increase in consumer confidence in utility bills vs. Dec-10, but this is likely to be a result of seasonality rather than a general shift in consumer attitudes. 

Employment:

The latest unemployment figures have provided some good news.  Although currently at 7.8% (approx. 2.5 million) the expected rapid growth in unemployment has yet to occur.  This suggests that private sector job growth may be able to offset some of the public sector job cuts.  With these public sector cuts looming the unemployment rate is unlikely to fall significantly for some time yet, which may explain why consumer confidence in job security has remained relatively stable at -21.  

Interest rate:

The Bank of England’s Monetary Policy Committee has once again kept its interest rate at 0.5%, giving priority to securing economic recovery over calming inflation, especially given the disappointing GDP figures.  Consequently confidence in savings (-47) and mortgage repayments (-19) has remained relatively stable.  However, markets are now expecting the base rate to rise during 2011, which will have a positive impact on confidence in savings, but a far greater negative effect on those with debt.

Predictions for the next three months

• Flattening out of current confidence dip. Consumers have lived with hard times before and currently all news is bad news, but actual effect may be limited

• Savings are very important to both consumers and advertisers, as more purchases become considered – accessing the savings pot is going to be more important

• Global price changes will hit the high-street, rising price of denim, oil and cotton

• Continued political disturbances in the Middle-East and North Africa will push oil prices up further, which will have an effect on consumer prices

If you would like further information about NI Commercial’s Consumer Eye tracker, please contact Martyn.Uren@newsint.co.uk