UK consumer confidence fell to its lowest level in at least 48 years after a surge in the cost-of-living left people more gloomy than at the depths of the 1970s energy crisis and during the recession more than a decade ago.
The market researcher GfK said its closely-watched measure of sentiment fell 2 points to minus 40 this month, the least since records began in 1974. It’s another sign that the worst inflation in four decades is threatening the recovery from the pandemic.
The figures add to pressure on Chancellor of the Exchequer Rishi Sunak to help those suffering the most. It also may give the Bank of England reason to move carefully in raising interest rates further.
“As prices and rates rise, the ability of consumers to spend is falling,” said Linda Ellett, head of consumer markets, retail and leisure at the consulting firm KPMG. “Outgoings are being scrutinized.” Sunak said this week that extra government spending to help consumers handle higher bills risks further stoking inflation, warning that hard times are coming for the UK economy.
“I cannot pretend this will be easy,” Sunak told the annual dinner of the CBI business lobby group on Wednesday. “The next few months will be tough.” Official figures Friday showed retail sales unexpectedly rose in April, a month that saw energy bills soar by more than half and the government put up payroll taxes. However, spending on alcohol and tobacco at supermarkets played an outsized role and the underlying picture is weak, with sales falling in the three months through April.
Britain’s cost-of-living squeeze and the potential for a recession is the biggest crisis facing Boris Johnson’s government, sparking daily calls for new policies and a comprehensive economic response. The UK is on course to be the advanced economy hit worst by high inflation and weak growth.
Johnson is so far resisting any major new measures but the clamor for action is growing. His government this week voted against introducing a windfall tax on the profits of oil and gas companies to offset soaring energy bills, but Sunak says he doesn’t rule out the possibility.
The government and central bank both say they are almost powerless to prevent inflation -- supercharged by soaring energy and food costs in the wake of coronavirus lockdowns and the war in Ukraine -- from surging even higher than its current level 9%.
With little help coming, GfK said consumers’ assessment of both their own and the wider country’s prospect having cratered over the past year. It’s the bleakest reading ever, exceeding the concerns that consumers reported after the UK decision to leave the EU or even the recession triggered by the financial crash more than a decade ago.
“Consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy, or the Covid shutdown,” said Joe Staton, client strategy director at GfK. “The outlook for consumer confidence is gloomy, and nothing on the economic horizon shows a reason for optimism any time soon.” Separate data from Lloyds gave further insight into the plight of consumers. Britons are spending 30% more on energy compared with this time last year, while three-quarters are extremely or very concerned about home energy prices, the bank said.
Almost 70% are extremely or very concerned about the rising prices of everyday items, up from 52% at the end of last year.