UK Consumer Confidence Hits Record Low as Household Mood Darkens

UK Consumer Confidence Hits Record Low as Household Mood Darkens

UK Consumer Confidence Hits Record Low as Household Mood Darkens

UK consumer confidence has fallen to its lowest level since comparable records began nearly 50 years ago, as the rising cost of living stokes concerns about personal finances and the economic outlook.

In monthly research from data provider GfK, the August index score for overall consumer confidence fell to -44 from -41 the previous month.

That was the lowest reading since the equivalent data was first produced in 1974.

The decline in confidence reflects an increasingly gloomy mood in the UK economy with prices rising at double-digit rates, the biggest drop in real wages in more than 20 years, a resurgence of strikes and pressure growing in public services.

The survey was conducted between August 1-12, a period when the Bank of England forecast the economy would soon slip into a recession lasting more than a year as households struggled to pay energy bills, which are likely to increase by more than 75%. percent in October compared to now.

All five elements that make up the overall consumer confidence index fell, leading Joe Staton, director of GfK, to say: “a sense of exasperation about the UK economy is the main driver of these findings.”

“[They] they point to a sense of capitulation, of financial events that are far beyond the control of ordinary people,” he said.

Linda Ellett, head of UK consumer, retail and leisure markets at KPMG, said declining confidence was likely to weaken retail sales soon, even though figures have held up year-to-date. . “A widespread reduction in spending power will lead to drops in demand and changes in purchasing behavior, which will affect the economy of the high street and in general,” she said.

Line chart of the Index score showing UK consumer confidence hitting an all-time low

When people were asked about their personal financial situation, their scores over the past year matched the low points of the financial crisis in 2008-09 and the period of austerity around 2012.

But expectations about his situation for next year will be more worrying. That number has fallen to -31, significantly worse than in either of those two previous periods.

The negative score reflects that many more people say their personal finances are likely to deteriorate rather than improve over the next year.

“With headline after headline revealing that record inflation is eroding household purchasing power, the pressure on the personal finances of many in the UK is alarming,” Staton said.

“Just making ends meet has become a nightmare and the crisis of confidence will only worsen with the darker days of autumn and the colder months of winter.”

Households were similarly pessimistic about the general economic outlook, with the score falling every month since December last year. In August, it stood at -68, worse than at the height of the first wave of coronavirus when the UK was under strict lockdown, though better than at the time of the global financial crisis.

Households’ assessment of the UK’s economic outlook for the year ahead was -60, more pessimistic than at any time since GfK began collecting data, and down 54 points from August 2021.

With so little confidence in their finances and economic situation, households were unlikely to say that now was a good time to make a major purchase. This subindex fell to -38, down 4 points in the month and from a level of -3 a year earlier.

On the contrary, with rising interest rates, people are increasingly thinking that now is a good time to save. If many increase savings at the same time and reduce spending, it will hasten the expected economic downturn this fall.

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