UK consumer confidence has fallen to its lowest level since records began in 1974 amid growing concern over the cost of living crisis.
Fueling fears Britain is heading into a recession caused by squeezed family budgets, the latest monthly snapshot showed consumers are now gloomier about their prospects than they were during the financial crisis of 2008.
Nearly all confidence measures tracked by polling firm GfK fell in May, continuing a steep decline from April, when households were hit by record increases in energy bills after the price cap was raised Ofgem.
Britain’s overall Consumer Confidence Index, a measure of how people view their personal finances and the wider economic outlook, fell two percentage points to -40 in May, topping the previous record high of -39 set in July 2008 when the global banking system was imploding.
Joe Staton, director of client strategy at GfK, said: “This means that consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy or of the Covid shutdown.”
Economists warned in April, when the index fell to -38, that such a low reading was consistent with the UK economy falling into recession, as it had tracked UK GDP closely for the past five years. decades.
“This correlation has been robust to many economic regimes and shocks, from the stagflation of the 1970s to the Great Moderation and the financial crisis,” said Robert Wood, UK economist at Bank of America. “Consumer confidence is important because it gives an early and reliable signal.”
UK inflation hit 9% in April, the highest level since the early 1980s, as struggling families come under increasing pressure from soaring energy bills, record prices gasoline and the rising cost of the weekly store.
It comes as the impact of Russia’s war in Ukraine ripples through global oil and gas markets, exacerbating a post-lockdown price spike.
Economists expect the historic hit to living standards will lead consumers to tighten their belts as soaring prices for essentials such as food, fuel and energy force them to cut back on other purchases . Official figures show retail sales fell more than expected in March, while industry data suggests the fall in spending continued in April as households grapple with the record 54% rise gas and electricity bills.
The Bank of England warned earlier this month that the UK economy was at heightened risk of recession as inflation headed towards 10%.
GfK said its index measure based on asking consumers about their plans for major purchases has declined in each of the past six months. Consumer pessimism was most evident in people’s views on the general economy, with an index of -63 for the past year and -56 for the year ahead.
Figures from the Office for National Statistics released on Thursday showed a six percentage point weekly drop in credit and debit card spending in the UK last week, as well as a 10 point drop in the number of diners sitting in restaurants. However, the figures come after the bank holiday weekend in early May, when sales surged.
The ONS said rising material and energy costs were the main concern for UK businesses. As many as 26% of businesses said rising costs were their biggest concern this month, up from 24% in April 2022, followed by 20% who said the spike in energy prices was the biggest concern.
GfK’s Joe Staton added: “Even the Bank of England is pessimistic, with Governor Andrew Bailey offering no hope of tackling inflation this week. The outlook for consumer confidence is bleak and there is no reason for optimism on the economic horizon anytime soon.