LONDON — Consumer confidence, the index that measures how ordinary British people feel about their personal financial situation, has again dipped below the level associated with their government’s ability to retain a majority in the House of Commons.
The decline is significant because it was one of very few economic indicators that correctly predicted Prime Minister Theresa May would lose seats in the June 8 snap election. The prediction was made by Pantheon Macroeconomics analyst Samuel Tombs as far back as May 19, weeks before the election, and during a period when everyone else — including all the opinion polls — expected a landslide victory for the Conservative party.
Here, for context, is Tombs’ expectation of what the GfK Consumer Confidence measure said about the Tories’ chances in the election back in May:
Note that the crucial level is -10. If an election occurs when confidence is below the -10 line, the majority of the previous government is reduced or overturned, history says.
And now, here is where confidence sits at its last measure, taken in July:
Tombs published the more recent chart in a note on new car registrations in the UK, which are also in decline. Car registrations tend to track consumer confidence. We’ve added some red notation to make it easier to see the crucial line that threatens sitting governments.
Obviously, the problem for the Conservatives is that with confidence in decline — and with Jeremy Corbyn’s Labour party riding high — staging another election would be extremely dangerous. The index says May would probably be toppled outright.
That sets up an interesting dynamic for May’s would-be leadership rivals inside the party, such as Foreign Secretary Boris Johnson, and offers some ironic comfort to May.
If a challenger were to force a new leadership vote inside the party and succeed in replacing May, the GfK index suggests that person would then likely lose the next election (assuming the new leader called one in hopes of legitimising their place as the new prime minister). In other words, toppling May in a coup might hand the winner a poison chalice.
The index also flashes a warning that May ought to not to be tempted to call another election anytime soon. That strategy was successfully pursued by Labour prime minister Harold Wilson in 1974, who “won” a general election in February of that year without a majority, but called another election and gained a small working majority the following October.
As far as Corbyn is concerned, the index means the next election cannot come soon enough.
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