UK consumer confidence falls to record low in September

Consumer confidence in the UK has defied expectations of an improvement and has fallen to a new all-time low as households struggle under the pressure of the cost of living crisis.

The consumer confidence index, a closely monitored measure of how people view their personal finances and broader economic prospects, fell 5 percentage points to minus 49 in September, research group GfK said Friday. That was the lowest since measurements began in 1974.

GfK’s director of customer strategy, Joe Staton, said confidence had “dropped” to new lows in September as households[ed] under pressure from the rising cost of living in the UK, driven by rapidly rising food prices, domestic fuel bills and mortgage payments”.

The drop surpassed expectations of a small rise to minus 42 predicted by economists polled by Reuters, who believed there would be some improvement after the government’s £150bn package to freeze household energy bills.

The data comes the day after the Bank of England raised interest rates by 50 basis points to 2.25 percent, the highest level since 2008, meaning borrowing will become more expensive for businesses and households.

“For consumers who are already struggling to control their household finances, the increased cost of borrowing as a result of the interest rate hike. . . could be the breaking point, leading to an accelerated decline in demand,” said James Brown, managing partner at global consultancy Simon-Kucher & Partners.

Taking into account the freeze on energy bills, the BoE expects inflation in the UK to peak in October at 11 percent from its current 9.9 percent, a high that is close to 40 years, pushing real incomes higher. of households will erode further.

ALSO READ:  A-Level results day 2022 LIVE: Number of students accepted onto university places FALLS

The data also follows confirmation, ahead of Friday’s mini-budget, that the government will reverse the 1.25 percent increase in national insurance contributions introduced in April from November.

Staton said the “mini-budget and longer-term agenda to drive the economy and rebalance household finances will be a major test of the popularity of Liz Truss’s new government.”

The GfK index, based on interviews collected in the first two weeks of the month, showed a record score for four out of five questions asked, relating to personal finance and the broader economic picture.

Forward-looking indicators, which follow expectations for the next 12 months, recorded the largest decline, with personal finance falling 9 percentage points and the economy by 8 percentage points.

Economists expect low consumer confidence to lead to falling spending, a trend the BoE noted in its agent poll released Thursday.

It found that food retailers reported customers opting for cheaper goods and cutting back on non-essential items, such as confectionery. Discount chains gained market share, while sales of household items such as furniture, electrical appliances and home improvement products declined.

Clothing sales were supported by the return to the office, but in the hospitality industry, turnover was at pre-pandemic levels. Holiday bookings also weakened and domestic tourism was limited by higher petrol prices.

However, financial services and legal advice such as tax planning, equity release, debt consolidation and early redemption were in high demand. Third sector organizations also reported a large increase in the number of people seeking debt counseling.

Source link

Related Posts

Leave a Reply

Your email address will not be published.

%d bloggers like this: