Concerns that the UK is heading for a significant slowdown in consumer spending have intensified as society has turned out to be darker for the economy than when banks were on the verge of collapse during the 2008 financial crisis.
The combination of rising energy prices, higher taxes and rising annual inflation to its highest level in three decades has meant that confidence is in free fall, according to the latest monthly picture of sentiment.
Labor has called on Rishi Sunak to do more to tackle the cost of living crisis after all five consumer confidence surveys by GfK saw a sharp drop in April, a month in which energy prices rose and national social security contributions increased.
Abena Oppong-Assare, the shadow finance minister at the Ministry of Finance, said: “These related figures are unfortunately not surprising, given that families are seeing a double blow from the huge increase in Tory taxes and rising energy bills.
“The collapse of consumer confidence shows how the cost of living crisis is hampering growth. How many warnings like this does the Chancellor need to understand the seriousness of the cost-of-life crisis? “
The report found that society is more pessimistic about their own finances, the state of the economy and their willingness to spend money on big tickets like cars.
The main consumer confidence index – a combination of five separate measures – fell seven points to -38 in April. A year ago the figure was -15.
Joe Staten, GfK’s director of customer strategy, said: “Cost cuts are really hitting the pockets of consumers in the UK and the trust rating in the title has dropped to an almost historic low.
“The results for the next 12 months for our personal finances at -26 and the overall economy at -55 are worse than the financial collapse in 2008. The result for next year’s personal finances is also worse than the initial shock from Covid in 2020. .
“When rising inflation and interest rates meet low growth and declining incomes, consumers will understandably be extremely cautious about all costs. There is clear evidence that the British think twice about shopping, as evidenced by the falling index of large purchases – now is not considered a good time to buy. This is terrible news for consumer confidence, and with little prospect of economic relief on the horizon, we can only predict further declines in the index for next year.
Sign up for the daily Business Today email or follow the Guardian Business on Twitter at @BusinessDesk
A separate study by consulting firm KPMG found that a third of consumers spent less in 2022, with a particularly sharp decline in clothing shopping and eating out.
Andrew Goodwin, UK chief economist at Oxford Economics, said: “We should not be surprised if GDP falls in the second quarter, given the likely impact of additional banking holidays. [for the Queen’s platinum jubilee] and the loss of support from Covid testing.
But talks about a recession in the UK seem premature, not least because there will be a mechanical recovery in the third quarter, because there will be a full quota of working days. However, increasing pressure on household finances means that the UK economy is on an unequal journey for the rest of 2022.
Add Comment