Gloominess continues in the country as the government announces its plan to kick-start UK economic growth with a flurry of tax cuts that will drive up borrowing.
Research group GfK today (23) said that the consumer confidence index, a closely watched measure of how people view their personal finances and wider economic prospects, dropped five percentage points to minus 49 in September, lowest since records began in 1974.
People are increasingly worried about their personal finances, and anxious that the economy is turning sour, research body GfK warns, a day after the Bank of England said the UK has probably entered recession this quarter.
This is the fourth new low in five months. Confidence in personal finances over the coming year shed nine points to -40, while confidence in the economy over the next 12 months lost eight points to -68, a really grim reading.
People are also very unwilling to buy big ticket items, as soaring inflation forces households to cut back.
Joe Staton, GfK client strategy director, said confidence had “tumbled” in September to a new low as households “buckl[ed] under the pressure of the UK’s growing cost of living crisis driven by rapidly rising food prices, domestic fuel bills and mortgage payments”.
The fall defied expectations of a small rise to minus 42 forecast by economists polled by Reuters, who thought there would be some improvement following the government’s £150bn package aimed at freezing household energy bills.
The data come the day after the Bank of England lifted interest rates by 50 basis points to 2.25 per cent, the highest since 2008, meaning borrowing will become more expensive for businesses and households.
Incorporating the energy bills freeze, the BoE expects UK inflation to peak at 11 per cent in October from its current 9.9 per cent, a near 40-year high, further eroding households’ real incomes.
Economists expect record-low consumer confidence to result in falling spending, a trend registered by the BoE in its agents survey published on Thursday.
It showed 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 goods and home-improvement products, fell.
