UK consumer confidence hits record high as household mood darkens

UK consumer confidence hits record high as household mood darkens

UK consumer confidence hits record high as household mood darkens

British consumer confidence has fallen to its lowest level since comparable records began nearly 50 years ago, with rising costs of living fueling worries about personal finances and the economic outlook.

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

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

The drop in confidence reflects a clouded mood across the wider UK economy with prices rising at double-digit rates, the biggest fall in real wages for over 20 years, a resurgence of strikes and mounting pressure in public services.

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

All five components that make up the overall consumer confidence index fell, prompting Joe Staton, director of GfK, to say: “a feeling of exasperation about the UK economy is the main driver of these results “.

“[They] indicate a sense of surrender, of financial events far beyond the control of ordinary people,” he said.

Linda Ellett, head of UK consumer markets, retail and leisure at KPMG, said falling confidence was likely to weaken retail sales soon, although the numbers held up now this year. “A widespread reduction in the ability to spend will lead to lower demand and a change in buying behavior, both of which will impact the high street and the broader economy,” she said.

Line chart of index score showing UK consumer confidence hitting record high

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

But expectations about their whereabouts in the coming year will raise further concerns. This figure fell to -31, much worse than in either of these two previous periods.

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

“With one headline after another showing record inflation eroding household purchasing power, the strain 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 get worse with the darkened days of autumn and the colder months of winter.

Households were equally gloomy 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 in a strict lockdown – although better than at the time of the global financial crisis.

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

With such low confidence in their finances and the economic situation, households were understandably unlikely to say it was time to make a major purchase. This sub-index fell to -38, down 4 points over the month and from -3 a year earlier.

On the other hand, with rising interest rates, people increasingly think that now is a good time to save. If many increase their savings at the same time and reduce their spending, it will accelerate the economic slowdown expected this fall.

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