- The GfK consumer confidence barometer gave a reading of -30 in October
- ONS: Retail sales volumes in Britain fell 0.9% last month
- The UK inflation rate currently stands at 6.7%, well above the Bank of England’s 2% target.
Consumer confidence in the UK has plummeted this month as high inflation continues to put pressure on household finances.
The GfK consumer confidence barometer, which measures how Britons view their own finances and the wider economy, gave a reading of -30 in October, a drop of nine points from September.
This was the biggest drop since the start of the coronavirus pandemic in March 2020, when the UK government forced non-essential shops to temporarily close.
Downbeat: GfK’s long-running consumer confidence barometer gave a reading of -30 for October, a nine-point drop from September
All five survey measures of the index showed a decline, but the main purchasing index – people’s willingness to spend on big-ticket items – has taken a particular hit, falling 14 points to -34.
Joe Staton, head of customer strategy at GfK, said the figures showed the cost of living crisis was continuing to create “acute pressure” for many buyers.
He attributed the growing unrest among consumers to sky-high energy and gasoline bills, as well as rising mortgage and rental costs, a weakening labor market and ongoing problems in the Middle East.
It came as the Office for National Statistics revealed that retail sales volumes in Britain fell 0.9 per cent last month, much worse than economists had predicted.
The decline was driven by online retailers and non-food stores, while jewelry, watches, furniture and lighting outlets saw lower demand and unusually warm weather affected fall clothing purchases.
But the ONS also said consumers were postponing spending due to the problems currently affecting the country’s economy.
Although the UK’s inflation rate has fallen significantly from its double-digit levels last year, it still stood at 6.7 per cent in September, well above the Bank of England’s 2 per cent target.
In a bid to control price increases, the Bank of England raised the base rate on 14 consecutive occasions between December 2021 and August 2023 before deciding to keep it at 5.25 percent in September.
However, it could make further rate hikes, in part due to the recent rally in oil prices following the start of the war between Israel and Hamas and production cuts by OPEC+ members.
This would drive up gas and electricity costs and leave Brits facing higher mortgage bills with even less extra cash to spend in shops, thereby slowing the recovery of the UK retail sector.
Thomas Pugh, economist at RSM UK, said: “With consumer confidence falling very sharply in October and savings in real terms returning to their pre-pandemic level, many consumers will choose to save any additional income rather than spend.” .
‘What’s more, for a large proportion of households, any increase in income will be absorbed by higher mortgage and rental costs, reducing their disposable income.
“As a result, while we expect consumer spending and retail sales volumes to increase gradually, we do not expect rising real wages to lead to a boom in consumer spending.”