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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK and US consumer confidence hits record low; Britons cut back on food shopping – as it happened

United Kingdom United States Office for National Statistics GfK Britain Covid-19
Rising inflation has forced customers to cut back on food shopping, and switch to cheaper items..
Rising inflation has forced customers to cut back on food shopping, or switch to cheaper items. Photograph: SolStock/Getty Images

Closing summary

The UK’s stock market is soaring as the week draws to a close, on hopes that central banks may not hike interest rates as rapidly as feared.

Perhaps ironically, signs that economic growth is cooling appears to be giving nervous investors some reassurance.

Commodity prices have dropped this week, business surveys have shown slower growth, and cash-strapped consumers are cutting back as confidence craters in the UK and the US.

That cocktail may ease inflationary pressures, and mean central banks don’t need to slam the brakes on quite so hard.

So with traders looking ahead, the FTSE 100 index is now up 2.5% or 172 points at 7194, its highest in around a week.

Speciality chemicals group Croda (+5.5%), veterinary medicine group Dechra Pharmaceuticals and equipment rental business Ashtead (+5.2%) are leading the risers.

Here’s today’s main stories:

Have a lovely weekend, we’ll be back on Monday. GW

Campaign calls for 1m UK consumers to stop paying energy bills

A campaign is urging 1 million UK consumers to stop paying their energy bills from October in protest at record price hikes.

Run by a group of activists who are operating anonymously for fear of repercussions from energy firms, the Don’t Pay campaign launched last Saturday and has already gathered 4,000 social media followers. They say they are hoping for a rerun of the poll tax protests that helped bring down Margaret Thatcher’s government when 17 million people refused to pay.

The manifesto, emblazoned in black and yellow on the group’s website, says:

“Millions of us won’t be able to afford food and bills this winter. We cannot afford to let that happen. We demand a reduction of bills to an affordable level. We will cancel our direct debits from 1 October if we are ignored.”

Another late development... US new home sales rose 10.7% last month, to a seasonally-adjusted rate of 696,000, beating forecasts.

The median sales price for a new home fell to $449,000 from a record high $454,700, which could signal some heat coming out of the market.

Stock markest are pushing higher, with the S&P 500 index now up 2%, and strong gains in Europe as well.

US consumer confidence at record lows

US consumer confidence has hit its lowest level on record, mirroring the slump in morale in the UK this month.

The University of Michigan’s gauge of consumer sentiment has fallen to just 50 this month, down from May’s level of 58.4, and even worse than the initial reading of 50.2 earlier in the month.

The June figure is the lowest reading on record, going back to the late 1970s, and follows inflation hitting 40-year highs and record gasoline prices at the pumps.

Joanne Hsu, director of the survey, explains:

“Inflation continued to be of paramount concern to consumers; 47% of consumers blamed inflation for eroding their living standards, just one point shy of the all-time high last reached during the Great Recession,”

“Consumers across income, age, education, geographic region, political affiliation, stockholding and homeownership status all posted large declines,”

The Bank of England’s chief economist has played down concerns that quantitative easing stimulus programmes are to blame for soaring inflation.

In a speech titled “What did the monetarists ever do for us?”, Huw Pill argues that the UK’s elevated inflation is largely due to external shocks, rather than excess money growth in the past.

Pill is telling an audience at the Walter Eucken Institut in Freiburg, Germany:

Higher international energy and goods prices have raised UK inflation via the usual direct and indirect effects. The overshoot of the 2% inflation target is substantial largely because the magnitude of these external shocks has been substantial.

Aggregate GDP is only now reaching pre-pandemic levels, lending credence to the view that it is weakness in supply rather than strength in demand that is driving the current strength of inflation.

Given the tightness of the UK labour market and perceived strength of pricing power in large parts of the corporate sector, the threat exists that higher headline inflation leads to second round effects in prices, wages and costs that exacerbate the magnitude and, crucially, the persistence of the target overshoot.

And channelling Life of Brian, Pill concludes:

I doubt that monetarism will be (re) embraced by either the academic or central bank communities in the coming years. But – just like the Romans in the famous Monty Python sketch – maybe our understanding of how the monetary policy transmission mechanism has, does and will work owes more to them than we typically care to admit.

If you’re looking for a meaty Friday afternoon read on monetary policy, the speech is online here.

UK airlines aren’t the only ones strugging to serve customers this summer.

Deutsche Lufthansa is canceling a total of 3,100 flights after a wave of coronavirus infections worsened staffing shortages, adding to Europe’s travel chaos as the crucial summer vacation period gets under way.

Bloomberg has the details:

Germany’s flagship airline on Friday announced it will scrap 2,200 domestic and European routes in July and August, on top of 900 cancellations unveiled earlier this month.

That’s around 4% of the carrier’s capacity during that period, according to a spokesperson. Lufthansa fell as much as 3.4% in Frankfurt.

The floor at the New York Stock Exchange in New York.
The floor at the New York Stock Exchange in New York. Photograph: Seth Wenig/AP

Stocks in New York have opened higher, as Wall Street shakes off some of last week’s fears over rising interest rates.

The S&P 500 index of US stocks has jumped by 1.2%, or 46 points, to 3,842 in early trading.

The Dow Jones industrial average of 30 large companies has gained 1%, while the tech-focused Nasdaq Composite is 1.5% higher.

Markets have recovered some ground in the last few days, after their worst week since March 2020.

It seems that fresh signs of economic slowdown have cooled fears about aggressive rate hikes from central bankers. With commodity prices down this week, price pressures could be easing, while the latest PMI surveys of purchasing managers have signalled demand has been tailing off.

Neil Wilson of Markets.com explains:

Recession fears mean the market has dialled back its expectations for just how the far the Fed will go, which is helping growth stocks to mount a defence

PMIs are declining and lower commodity prices has the market more focused on slowdown than searing inflation, which seems on-balance net positive for stocks.

Strikes threatened at largest exam board

A general view of pupils sitting an exam.

Unions say A-level and GCSE results may be disrupted by strike action being threatened at AQA, England’s largest examination board, after unions rejected a new pay offer, our education editor Richard Adams reports.

Unison is currently balloting 160 staff at AQA over industrial action this summer while Unite is also considering a ballot, although a spokesperson for AQA said there was “no chance” of exam results being delayed because many of the staff being balloted were not directly involved in exam marking.

The unions say staff have already rejected a 3% pay offer, while talks over the dispute through the conciliation service Acas failed to reach agreement.

Lizanne Devonport, Unison’s north west regional organiser, said:

“No one wants to cause disruption to students and teachers in the first summer back in exam halls since the pandemic but the employees feel like they’ve been left with no choice.

AQA must come back to the negotiating table, make a serious offer and stop threatening its dedicated staff.”

AQA said its pay offer included additional increases for lower-paid staff, so that the average pay rise would be 5.6%.

But the unions say that their members have endured years of below-inflation pay settlements, and claimed that AQA’s current offer involves “fire and rehire” of staff accepting new conditions.

Earlier this week, leaders of the country’s largest teaching union say they will ballot their members on strike action later this year unless the government agrees to an “inflation-plus” pay rise.

Updated

The closed Underground entrance at Waterloo Station earlier this week, during strike action by Tube and railway workers in London.
The closed Underground entrance at Waterloo Station earlier this week, during strike action by Tube and railway workers in London. Photograph: Anadolu Agency/Getty Images

The prospect of a summer of strike action has risen further today, as London Underground staff in the RMT union voted to continue with strikes in a dispute over pensions and job cuts.

More than 90% of the union’s members on the tube who voted, on a 53% turnout, backed continuing industrial action.

The RMT was legally required to obtain support to renew its mandate for strikes, after the latest 24-hour stoppage on Tuesday closed virtually all tube services in the capital.

Crude oil prices have risen today, with Brent crude up over $2 per barrel at $112.

That still leaves oil down for the week, though, as fears of recession hit commodity prices. That ought to feed through to petrol pumps, although the weaker pound has made oil imports more expensive too.

Craig Erlam, senior market analyst at OANDA, says slowdown concerns could push oil lower:

The prospect of a recession has made waves across financial markets and commodities haven’t been immune. Oil prices have undergone quite a significant correction over the last couple of weeks as traders adapt to the increased recession risks, one of the few things that could partially address the imbalance in the market.

Oil prices are paring losses at the end of the week but a little more two-way price action may be on the cards. Risks remain more tilted to the upside as a result of the tightness in the market but if we continue to see recession risks rise around the world, that could change.

German consumers could face a tripling of gas prices in the coming months after Russia’s throttling of deliveries to Europe, a senior energy official has said.

Moscow reduced the flow of gas through the Nord Stream 1 pipeline by 40% last week, citing technical reasons that Berlin dismisses as a pretext, prompting a four- to sixfold rise in market prices, said the head of Germany’s federal network agency, Klaus Müller.

Such “enormous leaps in price” were unlikely to be passed down entirely to consumers, Müller said, but German citizens had to brace themselves for dramatically rising costs.

He told public broadcaster ARD:

“A doubling or tripling is possible.”

Here’s the full story, by our Berlin correspondent Philip Oltermann:

As well as worrying German households, this won’t help business morale recover from its fall this month (see earlier post)

Pakistan imposes ‘super tax’ in effort to get IMF loan package moving

Pakistan’s government is imposing a one-off ‘super tax’ on its largest companies, in an attempt to restart stalled negotiations with the International Monetary Fund .

Finance minister Miftah Ismail said today that an extra one-time 4% tax will be levied on all industry for one year, to raise 400 billion Pakistani rupees (£1.5bn). Large-scale industries willl face a 10% super-tax.

Pakistan hopes the move will help unlock a new tranche of IMF funds which are needed to avert a balance of payment crisis, as rising food and fuel prices push it into economic crisis.

Ismail told parliament this today that:

“Let me share this good news that this country isn’t heading toward a default anymore.

“We’ve taken very difficult decisions.”

The 10% tax will be levied on 13 big industries, companies and corporations, including sugar, steel, cement, oil and gas, fertilizer, cigarettes, chemical, automobiles, banks, textile, LNG terminals and beverages, which have earnings exceeding 300 million Pakistani rupee

Their tax rates will go from 29% to 39%,” Ismail tweeted:

The news sent shares tumbling, with the benchmark Karachi 100 index down 4% - on a day when global markets are generally higher.

Earlier this month, a minister in Pakistan’s newly elected government appealed to the nation to drink less tea to help save on imports -- a call which was not warmly received.

Copper isn’t the only metal that had a bad week (see earlier post)

Other industrial metals also tumbled, with nickel down around 13% this week and tin 25%, its biggest weekly slump since at least 2005.

Fears of an economic downturn are hurting commodity prices, which had boomed earlier this year, driving up inflation.

“There is a risk of further losses,” said independent analyst Robin Bhar.

“A sharp economic slowdown or recession seems to be on the cards.”

Analysis: Retailers face long difficult summer, with consumer confidence at rock bottom

With consumer confidence at rock-bottom levels it hardly comes as a shock that retailers had a tough month in May, our economics editor Larry Elliott writes.

The real surprise was that the 0.5% drop in the volume of spending reported by the ONS was not worse.

GfK’s monthly survey of how consumers are feeling stretches back to 1974 and so includes some previous periods when times have been hard: the manufacturing wipe out of the early 1980s, the housing crash of the early 1990s and the global financial crisis of 2008 among them.

In all that time, consumers have never been as gloomy as they are now.

The reason for the pessimism is obvious: prices are rising a lot faster than wages, eating into spending power. Food sales have been especially hard hit as shoppers place self-imposed spending limits at supermarket check-outs.

Retail sales have been on a downward trend for the past year, but as Martin Beck, chief economic adviser at the Item Club has pointed out, initially the weakness was the result of consumers shifting spending from goods to services as lockdown restrictions were lifted.

But five falls in retail sales in the past seven months can’t be put down to a rotation effect. Consumers are not just being hit by higher prices of food: energy bills went up in April as did taxes. A long difficult summer for retailers looks inevitable.

UK retail sales
UK retail sales Photograph: ONS

Updated

Petrol and diesel prices reach new records again

Petrol and diesel pumps are seen at a Shell petrol station in Portland, United Kingdom.
Petrol and diesel pumps are seen at a Shell petrol station in Portland, United Kingdom. Photograph: Finnbarr Webster/Getty Images

UK motorists continue to be hit by record fuel prices at the pumps, as hopes of an end to rising prices are dashed.

The average price of petrol hit 190.22p yesterday, while diesel also moved up another half a penny to 198.46p, closing on the £2 per litre mark.

With both fuels once again setting new records, full tanks now cost £104.62 and £109.15 respectively (based on a typical 55-litre family car).

RAC fuel spokesman Simon Williams calls it “another miserable milestone” -- and criticises retailers for not passing on falling wholesale petrol prices.

“The cost of petrol at the pumps should really have stopped rising by now and should in fact be going into reverse. For some strange reason, the supermarkets continue to push unleaded higher very much against the trend on the wholesale market.

Drivers have every right to be angered by this. While there is no doubt wholesale costs increased dramatically a few weeks ago this is not the case now, so pump prices must start to fall for fuel retailers to retain credibility with their customers as well as not attracting the negative attention of the Competitions and Markets Authority.”

The CMA began a “swift high-level review of competition in the fuel retail market” this month, after being urged to investigate the sector by business secretary Kwasi Kwarteng.

The AA reported earlier this month that wholesale petrol costs had fallen from their peak, which raised hopes that rising petrol prices might “grind to a halt”.

Around 9 in 10 adults say their cost of living had risen over the past month, as inflation has tightened its grip on the economy.

The Office for National Statistics latest “Public opinions and social trends” report showed that 91% reported a jump in costs last month, up from 62% back in mid-November when polling began.

The most common reasons given were pricier food shopping (93%), gas or electricity bills (86%) or the price of fuel (80%).

Over 4 in 10 (43%) adults reported that they were buying less food when food shopping, which confirms the message from this morning’s retail sales. That’s up from just 8% back in September.

Plus, 46% of adults reported they had to spend more than usual to get what they normally buy this month, up from 18% last October

Updated

Back in the financial markets, European retail stocks have fallen to their lowest level since the onset of the COVID-19 pandemic in 2020 -- reflecting recession worries.

The profit warning from online fashion retailer Zalanda, the drop in UK consumer confidence to record lows, and the fall in retail sales in May all helped to push stocks down.

The STOXX 600 retail sector hit its lowest level since March 2020, on track for its fourth consecutive week of declines as the cost of living crisis forces consumers to cut back.

More railway workers are to be balloted for strikes amid growing disputes across the industry, increasing the threat of disruption to services over the summer, PA Media reports.

The Transport Salaried Staffs Association (TSSA) served notice to ballot its members at Greater Anglia for strike action and action short of strike over pay, conditions and job security.

The union is demanding a guarantee of no compulsory redundancies for 2022, no unagreed changes to terms and conditions, and a pay increase which reflects the rising cost of living.

Voting starts on June 29, with the result due in mid-July, so the earliest date strike action could take place is July 27.

The TSSA is also balloting its members in Network Rail, CrossCountry, East Midlands Railway, West Midlands Trains, Avanti West Coast, Northern, LNER, C2C, Great Western Railway (GWR) and TransPennine Express.

Earlier this week, TSSA members at Merseyrail accepted a pay deal worth 7.1%.

Heads-up: Scammers are attempting to exploit the cost of living crisis by targeting consumers whose energy supplier has collapsed, analysis by Which? has found.

Former customers of bust suppliers including Solarplicity, Future Energy and Northumbria Energy have been singled out by fraudsters attempting to exploit the confusion caused by the companies’ failures, the consumer group said.

Here’s the full story:

Another blow. German business morale fell more than expected in June.

Rising energy prices and the threat of gas shortages are spooking businesses in Europe’s largest economy, according to the Ifo institute.

Ifo’s business climax index, just released, has dropped to 92.3 from 93.0 in May, which reverses last month’s recovery.

On Thursday, Germany moved a step closer to gas rationing, after the country’s economic ministry warned of a high risk of long-term supply shortages.

Russia has been systematically choking off gas deliveries through the Nord Stream 1 pipeline, leading to concerns that Germany won’t have enough gas stored for the winter.

European stock markets are ending a choppy week with some gains, after Wall Street managed a rally last night.

  • FTSE 100: up 58 points or 0.8% at 7078
  • German’s DAX: up 39 points or 0.3% at 12,952
  • France’s CAC: up 56 points or 1% at 5940

That’s despite economic data yesterday suggesting business growth slowed in the eurozone and the US, while UK firms were hit by a slowdown in new orders.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:

The market sentiment is better, but the news is not. The latest flash PMI readings from Japan to Europe and to the US showed a slowing global activity in June. Almost all regions missed the analyst expectations.

High energy prices, the Ukraine war and the pandemic disruptions, the tighter monetary policies and the rising borrowing costs are weighing on the global economic activity, and we now start seeing it through the PMI figures.

Weak growth could mean central bankers don’t raise interest rates as fast as feared, if they also see signs that inflationary pressures are abating.

Copper set for steep weekly loss amid slowdown worries

Today’s fall in retail sales and grim UK consumer confidence data cap a week in which recession worries have swirled.

And copper has paid the price - on track for its worst week in a year.

Three-month copper on the London Metal Exchange was down 1.6% at $8,273 a tonne this morning, the lowest since since February 2021.

The contract lost 7.7% so far this week, Reuters reports, as weak economic data this week has suggested an economic downturn, meaning less demand for commodities.

As if retailers didn’t have enough to worry about, European online retailer Zalando slashed its profit and sales forecasts last night.

Germany’s Zalando warned it expects weaker results in the second quarter and cut its full-year outlook, blaming worse-than-anticipated macroeconomic conditions.

Like many Internet retailers, Zalando saw a surge in sales early in the pandemic. But as shops have reopened, and inflation has soared, customers are cutting back.

It now expects to post adjusted earnings of €180m to €260m, down from previous guidance of €430m to €510m.

Shares have slumped over 15% this morning. UK retailers are also in the red, with Ocado (-2.2%), JD Sports (-1.2%) and Next (-1.1%) among the FTSE 100 fallers.

Updated

Ongoing supply chain problems are also hitting retailers, says Matt Jochim, partner at McKinsey & Company, and industrial action could add to the load.

“Shopping behaviour is changing as inflation takes its toll on spending. Food, household goods and furniture sales volumes reduced as consumers held back on big ticket purchases.

“Supply chain disruptions remain a factor, as retailers and consumer goods manufacturers continue to navigate lead time uncertainty and associated cost pressures like driver wage increases and container freight costs.

“Retailers will find navigating the summer months a continued challenge, as they contend with holiday plans and rail strikes.

UK food spending
UK food spending Photograph: ONS

Full story: Retail sales fall as shoppers cut back

Britons are spending less on food as rising prices force them to cut back on their weekly supermarket shop, our economics editor Larry Elliott writes.

The Office for National Statistics (ONS) said smaller grocery bills were the main factor behind a 0.5% drop in retail sales in Great Britain last month.

However, department stores and household goods outlets also reported a reluctance of consumers to spend as a result of a higher cost of living.

The UK’s statistics agency said the 1.6% decrease in the volume of food sales appeared to be linked to inflation, which as measured by the consumer prices index hit a 40-year-high of 9.1% in May.

Retail sales growth in April was also revised down from an original estimate of 1.4% to 0.4%, while in the three months to May – a better guide to the underlying trend than a single month’s figures – spending was down by 1.3% on the previous quarter.

Here’s the full story:

Updated

UK retail sales (excluding fuel) are down by roughly 4% since last October, reports James Smith, economist at ING.

That tumble is due to the cost of living squeeze and a more general rotation from goods to services spending as the Covid-19 lockdowns have been eased, he says.

Smith predicts there will be further weakness ahead (although the ‘solid’ jobs market should provide support).

The cost of living squeeze is likely to cause a further hit to demand over the coming months.

Confidence fell to another all-time low in June, despite new government support measures. The near-10% rise in petrol/diesel prices over the past month has dealt another blow to finances.

He’s also produced this neat chart of today’s consumer confidence report, showing how people are pessimistic about the financial outlook, and very reluctant to make major purchases:

UK consumer confidence report
UK consumer confidence report Photograph: ING/GfK

May’s drop in retail sales follows a “triple whammy” of rising energy prices, spiralling food prices and a hike in National Insurance in April.

Maxim Syn, head of desk at global financial services firm Ebury, said these all dampened demand.

Household budgets were also squeezed from all directions as the weakening pound and global inflationary pressures create further headwinds for the economy.

Syn adds:

“Food prices in particular have seen big increases with Wednesday’s inflation figures showing food was the biggest contributor with bread, cereals and meat seeing the largest upticks.

This is down to rising wholesale food prices and the cost of raw materials.

The cost of living crisis bit harder last month, says Nicholas Farr, assistant economist at Capital Economics:

The 0.5% m/m drop in retail sales volumes in May (consensus -0.7% m/m) was the third decline in four months, follows a downwardly revised rise in April and suggests that the fall in real incomes from higher inflation is starting to hit consumer spending harder.

More pain probably lies in store for the retail sector over the coming months, but that won’t stop the Bank of England from raising interest rates further.

BJSS: Little sign of a turnaround

On an annual basis, retail sales volumes shrank by 4.7% compared with May 2021.

But the amount spent jumped by 5% year-on-year, which underlines how inflation is taking a bite out of incomes.

Ralph Robinson, Head of Retail at technology consultancy BJSS, says retailers could face a tough summer as customers set stricter spending limits.

“It’s unsurprising that consumer confidence is so low; amidst a further rise in inflation, poor performance of the FTSE, supply chain uncertainty and a looming recession, it seems retailers are struggling to elicit anything other than unavoidable spending, such as on food, with holiday fashion the only notable exception. For me, ASDA’s chairman Stuart Rose sums up current consumer sentiment best - sharing how shoppers are now setting £30 spending limits at the tills, down further still from the £40 limits cited by Tesco’s chairman John Allan just a month ago.

“Sadly, whilst retailers will be looking hopefully to a bumper set of results next month, there is little sign of a turnaround, as retailers face the added pressure on supply chains, driven by Covid pressures in China, rail strikes in the Uk and the ongoing Ukraine conflict, coupled with reduced footfall on the highstreet. Whilst we would hope for an uplift, with inflation showing no sign of reducing, retailers will likely be concerned that this trend might continue throughout the entire summer season.”

Households reined in spending as the cost-of-living crunch continued to squeeze consumer demand, says Helen Dickinson, chief executive of the British Retail Consortium:

Many customers are buying down, particularly with food, choosing value range items where they might previously have bought premium goods. High value items, such as furniture and white goods, were also impacted as shoppers reconsidered major purchases during this difficult time.

Higher operational and input costs have pushed up prices, meaning retailers and their customers both face “hard times ahead”, Dickinson adds:

Feedback from supermarkets suggested customers were spending less on their food shop, because of the rising cost of living, says Heather Bovill, ONS deputy director for surveys and economic indicators.

Here’s her analysis of today’s retail sales report:

Clothes shops had a busier May, with clothing sales up 2.2% in the month.

But consumers cut back on household goods, where sales fell 2.3%, and department stores where volumes dropped 1.1%.

Automotive fuel sales volumes rose by 1.1% in May.

That may be due to an increase in hybrid working and a fall in those working exclusively from home, the ONS says.

Retail sales fall as consumers cut back on food

Retail sales fell in May as the rising cost of living hits household budgets, forcing people to cut back on food shopping.

Retail sales volumes across Great Britain fell by 0.5% in May from April, or by 0.7% if motor fuel is excluded, figures just released show.

The fall in sales volumes was driven by less spending at food stores, which fell by 1.6% month-on-month.

Reduced spending in food stores seems to be linked to the impact of rising food prices and the cost of living, the Office for National Statistics says.

But... shoppers had to spend more to get less. The value of retail sales rose by 0.2% month-on-month, and by 0.6% once you add in fuel (which hit record high prices).

UK retail sales to May
UK retail sales to May Photograph: Office for National Statistics

Inflation hit 9.1% in May, the highest in 40 years, which intensified the wage squeeze.

In the three months to May 2022, sales volumes fell by 1.3% when compared with the previous three months. This “continues the downward trend since summer 2021”, the ONS says.

Updated

Introduction: UK consumer confidence at record low

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

UK consumer confidence has fallen to its lowest level since records began nearly 50 years ago, as the cost of living crisis hits households, and a summer of strike action looms.

Research company GfK’s monthly survey of Consumer Confidence Index has hit a new record low this month, dropping one point to -41 in June.

UK consumer confidence report
UK consumer confidence report Photograph: GfK

There was a particularly sharp drop in people’s personal financial expectations, as inflation squeezed incomes.

Measures of changes in personal finances over the last year, and of general economic situation over the last year and the next year all dropped.

Joe Staton, Client Strategy Director, GfK says Britain faces a stark new economic reality, and people are reacting accordingly:

With prices rising faster than wages, and the prospect of strikes and spiralling inflation causing a summer of discontent, many will be surprised that the index has not dropped further. The consumer mood is currently darker than in the early stages of the Covid pandemic, the result of the 2016 Brexit referendum, and even the shock of the 2008 global financial crisis, and now there’s talk of a looming recession.

One thing is for sure, Britain faces a stark new economic reality and history shows that consumers will not hesitate to retrench and tighten their purse strings when the going gets tough.”

UK consumer confidence index
UK consumer confidence index Photograph: GfK

Britain’s bosses are gloomier too.

Flash estimates of the economy’s performance in June, released yesterday, showed business optimism at its lowest since the early months of the Covid pandemic in the spring of 2020 and the sharpest drop in new order volumes for a year.

Later today we’ll find out how optimism is holding up (or not) among German investors, and US consumers, as fears that major economies could be tipped into recession grow.

The agenda

  • 7am BST: UK retail sales for May
  • 9am BST: IFO index of German business confidence
  • 2.30pm BST: Bank of England chief economist Huw Pill gives a speech on ‘Inflation and Debt – Challenges for Monetary Policy after Covid-19’
  • 3pm BST: University of Michigan survey of US consumer sentiment
  • 3pm BST: US new home sales report for May
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