GfK: potential Brexit shifts UK economic expectations down

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According to the GfK Consumer Climate Europe study for the first quarter of 2016, there have been numerous areas which are causing increasing consumer concern of an economic slowdown.

During the first quarter of 2016, the Syrian war as an ongoing cause of the refugee crisis, the terrorist threat in Europe, Great Britain’s possible exit from the EU and the continued recession in major developing countries weakened the consumer climate and, in particular, the economic and income expectations of European consumers. Between December 2015 and March 2016, the consumer climate for the EU28 fell by 3.2 points to 9 points.

In Great Britain especially, the referendum due to take place in June on the country’s possible exit from the European Union is casting a shadow of doubt on the future. Numerous economic experts as well as many British consumers are predicting strong negative economic consequences should a so-called Brexit come to pass.

GfK_logoFor the UK, the indicator stood at 2.1 points in March, just slightly above its long-term average of 0 points. This represents a loss of 14.5 points since December, and a ‘staggering’ drop of 25.8 points in comparison with March 2015. This trend is in stark contrast with the country’s actual level of economic growth, which last year increased by between 1.8 and 3.0% in comparison with the respective previous quarter.

One reason for the rather pessimistic underlying mood among consumers could be the referendum due to take place in June about whether Great Britain should leave or remain in the EU, GfK posits. Many consumers feel irritated, and seem to fear there could be negative repercussions for the domestic economy should the referendum lead to a so-called Brexit, the market researcher adds.

At the other end of the spectrum, British consumers are expecting a moderate increase in wages and salaries over the next few months. In March, income expectations lay at 17.7 points. Although this figure is more than 5 points lower than in December, it is similar to the level seen in March of last year (15.8 points).

As was also the case in the last quarter, only a few British consumers currently wish to make expensive purchases. This is illustrated by the fact that the propensity to buy indicator lay at 11.1 points in March. This represents an increase of 0.5 points in comparison with December as well as a rise of 2.3 points compared with this time last year. 

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