Consumer confidence in the UK is weaker than during the four major recessions of the past half-century, as rapidly rising inflation saps morale.
Although the UK is technically not yet in recession, the latest sentiment from data firm GfK found the public gloomier than at any time since the survey began in January 1974.
The monthly look at confidence found that the relatively positive mood as Britain emerged from lockdown in 2021 had been replaced by deepening pessimism as the annual rise in the cost of living climbed to a 40-year high of 10.1%.
In grim news for businesses that rely on consumer spending, public sentiment is now more downbeat than it was during the recessions of the mid-1970s, early 1980s, early 1990s and late 2000s.
The period covered by the survey also covers the three-day week in 1974, the pound crisis in 1976 and the pound’s expulsion from the European Exchange Rate Mechanism in 1992 – none of which were marked by such a gloomy public mood.
Sentiment has fallen steadily through 2022 and fell a further three points to a record low of -44 in August. A year ago, the index was -8.
Consumers are pessimistic about the outlook for their own economy in the coming year (-31) as a further sharp increase in the energy price ceiling threatens in October, but even more pessimistic (-60) about the outlook for the economy.
Joe Staton, GfK’s director of client strategy, said there had been a fall in all five measures that made up the overall consumer confidence index, reflecting “urgent concerns” about rising living costs.
“A sense of irritation about the UK economy is the biggest driver of these findings. Our sub-measure of the overall economy over the past year has declined month-on-month since December 2021.”
Staton said there had been a similar consistent marked decline since the end of last year in how consumers viewed the economy, with the August score of -60 a new record.
“These findings point to a sense of capitulation, of economic events moving far beyond ordinary people’s control. With headline after headline revealing record high inflation eroding household purchasing power, the strain on the personal finances of many in the UK is alarming. Just making ends meet to meet has become a nightmare, and the crisis of confidence will only worsen with the darker autumn days and the colder winter months.
The latest flash estimates for consumer spending released on Thursday by the Office for National Statistics showed restaurant numbers were unchanged in the week to August 14, while credit and debit card payments fell by seven percentage points.
Linda Ellett, head of consumer markets, retail and leisure at KPMG in the UK, said: “Storm clouds are now fast approaching, with higher costs reducing the discretionary purchasing power of even more households this autumn and winter.
“So far this year, retail sales have somewhat defied very low levels of consumer confidence. But 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.”