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 yet to enter recession, the latest barometer of sentiment from the data company GfK found the public gloomier than at any time since the survey began in January 1974.
The monthly look at confidence found the relatively upbeat mood as Britain emerged from lockdown in 2021 had been replaced by deepening pessimism as the annual increase in the cost of living has climbed to a 40-year high of 10.1%.
In grim news for businesses that rely on consumer spending, the public mood is now more downbeat than it was during the recessions of the mid-1970s, the early 1980s, the early 1990s and the late 2000s.
The period covered by the survey also covers the three-day week of 1974, the sterling crisis of 1976, and the pound’s ejection from the European exchange rate mechanism in 1992 – none of which was marked by such a bleak public mood.
Sentiment has been falling steadily throughout 2022 and dropped by a further three points to a record low of -44 in August. A year ago the index stood at -8.
Consumers are pessimistic about the outlook for their own finances in the year ahead (-31) as a further sharp increase in the energy price cap looms in October, but even more pessimistic (-60) about the prospects for the economy.
Joe Staton, GfK’s client strategy director, said there had been a fall in all five measures that made up the overall consumer confidence index, reflecting “acute concerns” about a soaring cost of living.
“A sense of exasperation about the UK’s economy is the biggest driver of these findings. Our sub-measure on the general economy over the past year has decreased month-on-month since December 2021.”
Staton said there had been a similar consistent marked decline since the end of last year in how consumers viewed the economy, with the August score of -60 a new record.
“These findings point to a sense of capitulation, of financial events moving far beyond the control of ordinary people. With headline after headline revealing record inflation eroding household buying power, the strain on the 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 darkening days of autumn and the colder months of winter.”
The latest flash estimates of consumer spending released on Thursday by the Office for National Statistics showed restaurant numbers did not change in the week to 14 August, while payments by credit and debit cards decreased by seven percentage points.
Linda Ellett, UK head of consumer markets, retail and leisure at KPMG, said: “Storm clouds are now fast closing in, 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 the very low levels of consumer confidence. But a widespread reduction in spending ability will lead to drops in demand and changing buying behaviour, both of which will impact the high street and wider economy.”
