Brexit latest: Consumer confidence falls in February

The latest net balance reading from the GfK Consumer Confidence Index for February fell to -6, down from -5 in January

Retail sales have flagged in recent months (Getty)

The confidence of British consumers ebbed in February, adding further doubt about the ongoing spending capacity of the household sector which has sustained the overall economy since last year's Brexit vote.

The latest net balance reading from the GfK Consumer Confidence Index for February fell to -6, down from -5 in January.

The balance recorded its biggest monthly drop in two decades in the wake of last June's EU referendum result when it plunged to -12, stoking fears that the economy could be slipping into recession.

But the balance rapidly bounced back to -1 in September, as confidence flooded back.

Yet although still well above its long-run average for the series, the indicator has now been on a gradually downward trend since last October.

Declining trend?


 GfK

"Any momentum behind the post-Brexit, debt-fuelled, consumer-spending boom now appears to be softening," said Joe Staton, head of market dynamics at GfK.

According to GfK the major purchase sub-index fell from 10 to 5 and the personal situation over the next 12 month index declined from 7 to 3.

However, there was a slight improvement in the reading for the balance of expectations of the general economic situation over the next year, rising from -23 to -20.

The economy has held up much better than the majority of economists expected in the wake of the Brexit vote, with growth of 0.6 per cent in the three months to September and 0.7 per cent in the following quarter.

Household spending has been almost entirely responsible for this growth, with business investment falling over the 2016 calendar year - the first annual drop since 2009.

But retail sales, which account for 30 per cent of household consumption, have been flagging in recent months and analysts expect the increase in inflation to further crimp households spending this year, slowing overall GDP growth.

In its most recent Inflation Report the Bank of England projected the household sector to just about sustain its spending, mainly by running down the aggregate household savings rate to just 3.25 per cent, down from 5.6 per cent in the latest official data.

Other economists are doubtful that households will be willing to do so.

The GfK survey found a deterioration in the balance of respondents saying that now is a good time to save, from -2 to -4.