Ultimate magazine theme for WordPress.

UK consumer confidence hits record low as household mood darkens


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

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

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

The confidence figures were published on Friday shortly before retail sales figures released by the Office for National Statistics showed spending edged higher in July. The figures were boosted by online promotions but the overall trend was for people to shop less.

The volume of goods sold rose 0.3 per cent in the month, bucking expectations that it would extend the decline in May and June but, over the most recent three-month period, sales were down 1.2 per cent on the previous three months.

Online sales rose 4.8 per cent in July, which the ONS attributed to promotions led by Amazon’s Prime Day in the middle of last month.

Stripping this out of the figures, retail sales volumes were down 3.4 per cent in July on an annual basis. The value of sales was up 7.8 per cent over the same period, highlighting the rise in prices on the high street.

The decline in consumer confidence reflects a darkening mood across the UK economy, with prices rising at double-digit rates, the largest drop in real wages for more than 20 years, a resurgence of strikes and mounting pressures across public services.

GfK’s survey was undertaken between August 1 and 12, a period in which the Bank of England forecast the economy would soon slide into a recession lasting more than a year as households struggled to pay energy bills, which will probably rise more than 75 per cent in October.

All five elements that comprise the overall consumer confidence index fell, prompting Joe Staton, a director at GfK, to say: “A sense of exasperation about the UK’s economy is the biggest driver of these findings.”

“[They] point to a sense of capitulation, of financial events moving far beyond the control of ordinary people,” he added.

Linda Ellett, UK head of consumer markets, retail and leisure at KPMG, said the decline in confidence would probably weaken retail sales and lead to “changing buying behaviour, both of which will impact the high street and wider economy”.

UK consumer confidence hits a record low

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

But expectations for their situation over the coming year will cause more concern. That figure has fallen to minus 31, significantly worse than in either of those earlier periods.

The negative score reflects many more people saying their personal finances will deteriorate rather than improve over the year ahead.

“With headline after headline revealing record inflation eroding household buying power, the strain on the personal finances of many in the UK is alarming,” said GfK’s Staton.

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

Households were similarly gloomy about general economic prospects, with the score declining every month since December last year. In August, it stood at minus 68, worse than at the height of the first coronavirus wave when the UK was in a strict lockdown, although better than during the global financial crisis.

Households’ assessment of the UK’s economic prospects in the year ahead was minus 60, more gloomy than at any time since GfK started collecting the data, and 54 points lower than in August 2021.

With such low confidence in their finances and the economic situation, households were naturally unlikely to say that now was a good time to make a big purchase. This sub-index fell to minus 38, down 4 points on the month and from a level of minus 3 a year earlier.

In contrast, with interest rates rising, people increasingly think now is a good time to save. If many people increase savings at the same time and reduce spending, it will accelerate the expected economic downturn this autumn.

Source link

Leave A Reply

Your email address will not be published.