Consumer confidence took another hit last month as soaring mortgage rates weighed on household finances.
Polling by YouGov and the Centre for Economics and Business Research (Cebr) shows there was a decrease of 1.6 points in July to 100.0 – meaning the nation is “neutral” on the economy, having previously been slightly optimistic. This was the second month in a row that there was a decline after confidence had improved since the aftermath of the mini-Budget last November.
Short-term confidence over personal finances – people’s views on the previous 30 days – worsened, decreasing by 2.4 points to 76.3 in July. Outlook for finances over the next 12 months also declined to 76.3 (-4.7 points).
Confidence in house prices also declined, with the short-term score down by 2.7 points from 107.4 to 104.7. The measure for house values in the year ahead saw a minor drop (-0.4 per cent).
The index found that while short-term confidence over job security declined by 0.6 points, there was more optimism for the year ahead, with scores for job security in the next 12 months increasing by 1.6 points to 116.2 – the only measure in the index to increase in July.
Employees were also more likely to report a slowdown in business activity over the past 30 days (-2.8 ) and were marginally less confident about activity over the next 12 months.
Kay Neufeld, director and head of forecasting and thought leadership at Cebr, said, “Following a near uninterrupted upswing in consumer sentiment since November last year, British consumers have cooled on their assessment of economic conditions in recent months. While inflation has started to fall back, it still remained uncomfortably high at nearly 8% in June on the Consumer Prices Index.
“This was reason enough for the Bank of England to hike interest rates once more last month to stand at 5.25%. Concerns about rising mortgage rates and wider housing cost pressures have likely contributed to falls in household finances and home value indicators. At the same time, the falls in both business activity measures corroborate with our expectation that output growth will remain subdued in the near term.”
