UK consumer confidence hits record low as household mood darkens

Britain’s consumer confidence has fallen to its lowest level since comparable records began almost 50 years ago, as the rising cost of living raises concerns about personal finances and economic prospects.

In monthly surveys from the data provider GfK, the August index for total consumer confidence fell to -44 from a figure of -41 the month before.

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

The drop in confidence reflects a darker mood across the UK economy with prices rising by double digits, the biggest fall in real wages for more than 20 years, a resurgence of strikes and growing pressure across public services.

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

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

“[They] points to a sense of capitulation, of economic events moving far beyond the control of ordinary people,” he said.

Linda Ellett, head of consumer markets, retail and leisure at KPMG in the UK, said the drop in confidence was likely to dampen retail sales soon, although figures have held up so far this year. “A widespread reduction in spending power will lead to a fall in demand and changing buying behaviour, both of which will affect the high street and the wider economy,” she said.

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

But the expectations for their situation in the coming year will cause more concern. This figure has fallen to -31, significantly worse than in either of the two previous periods.

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

“With headline after headline revealing 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 worsen with the dark days of autumn and the colder winter months.”

Households were similarly gloomy about the overall economic outlook, with scores falling every month since last December. In August it was -68, worse than at the height of the first coronavirus wave when the UK was in strict lockdown – but better than at the time of the global financial crisis.

Households’ assessment of Britain’s economic outlook in the coming year 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 the economy and the financial situation, households were naturally unlikely to say that now was a good time to make a major purchase. This sub-index fell to -38, down 4 points from the month and from a level of -3 the year before.

Contrary to rising interest rates, people increasingly believe now is a good time to save. If many people increase their savings at the same time and reduce spending, it will speed up the expected economic downturn this autumn.

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