LIVE MARKETS-UK consumer sentiment down post-Labour budget - JP Morgan

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UK CONSUMER SENTIMENT DOWN POST-LABOUR BUDGET - JP MORGAN

The UK consumer is looking weak compared to other countries, according to a survey by JP Morgan that reached 5,000 consumers across Germany, France, Spain, UK and U.S.

"Consumer sentiment has stepped down in the UK post the Labour Budget, with 50% of UK respondents feeling worse off compared to only 14% expecting to be better off financially."

"Unsurprisingly, therefore, UK consumers expect to spend less on discretionary items in the near term," write the JPM team.

The findings pile on more pain following Friday's official data out of the UK showing British retail sales fell by much more than expected in October - and these figures were pre-budget.

Among countries surveyed, expected spending cuts over the next 12 months are the highest in the UK, JPM says, which also saw one of the largest deteriorations in the outlook for spending versus JPM's last survey in March.

Broader European consumer sentiment is unchanged versus the last survey, while U.S. sentiment improved. It is now the least worried country.

What about savings intentions? They remain elevated, particularly in Germany.

"Across all markets around a quarter of respondents are planning to save more than historically, while 16% are planning to save less, which on balance looks to be unfavourable for the discretionary spending outlook," says JPM.

Only about 10% of respondents still have excess pandemic savings they are willing to spend.

Caution still abounds when it comes to buying on credit due to higher interest rates, with about half of respondents reducing their reliance on credit and store cards.

"Recall that UK clothing retailer Next, which generates c.15% of EBIT from providing consumer finance, saw flat interest income yoy in the latest quarter (with no growth witnessed for the first time in over two years)," says JPM.

Consumers are planning to spend less on clothes, with this weakness still most pronounced in France and the UK. There has also been a reversal in the UK's DIY outlook, which had been improving.

JPM continues to prefer Marks & Spencer MKS.L in the UK, with an overweight rating, and reiterates its negative stance on UK home improvement company Kingfisher KGF.L which has an underweight rating.

In food retail, downtrading persists, but JPM says the survey results read positively to Tesco TSCO.L which they are underweight on, suggesting the consumer finds value in its proposition.

(Lucy Raitano)

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