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 still in recession, the latest sentiment barometer from data firm GfK found the public gloomier than at any time since the survey began in January 1974.
The monthly survey of confidence found that the relatively upbeat mood as Britain emerged from lockdown in 2021 had been replaced by deepening pessimism as the annual rise in the cost of living has risen to a 40-year high of 10.1%.
In dismal news for businesses that depend on consumer spending, public sentiment is now more unfavorable than during the recessions of the mid-1970s, early 1980s, early 1990s and late 2000s.
The period covered by the survey also covers the 1974 three-day week, the 1976 sterling crisis and the pound’s expulsion from the European Exchange Rate Mechanism in 1992, none of which were marked by a public mood so bleak.
Sentiment has been falling steadily throughout 2022 and dropped another three points to an all-time low of -44 in August. A year ago the index stood at -8.
Consumers are pessimistic about the outlook for their own finances next year (-31) as another sharp rise in the energy price cap is set for October, but even more pessimistic (-60) on the prospects of the economy.
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Joe Staton, director of client strategy at GfK, said there had been a fall in all five measures that made up the overall consumer confidence index, reflecting “sharp concerns” about the rising cost of living.
“A sense of exasperation about the UK economy is the main driver of these findings. Our sub-measure on the overall economy over the past year has declined month-on-month since December 2021.”
Staton said there had been a similar sharp and steady decline in how consumers view the economy since late last year, with August’s score of -60 a new record.
“These findings point to a sense of capitulation, of financial events far beyond the control of ordinary people. With headline after headline revealing record inflation eroding household purchasing power, the pressure on personal finances of many in the UK is alarming. 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 months of winter.”
The latest flash estimates of consumer spending released by the Office for National Statistics on Thursday showed that the number of restaurants was unchanged in the week to August 14, while payments by credit and debit cards fell seven percentage points.
Linda Ellett, UK head of consumer, retail and leisure markets at KPMG, said: “Storm clouds are closing in fast, with higher costs reducing the discretionary spending 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 falls in demand and a change in buying behavior, both of which will affect the high street and the wider economy.”