UK consumer confidence drops to near historic lows amid double-digit inflation and rising energy prices
- GfK’s monthly consumer confidence index fell 4 points to -45 in January
- That was just four points above the record low of -49 recorded in September.
- Consumer incomes have been hit by record energy bills and rising food prices
Consumer confidence has fallen near its historic nadir as high inflation and sky-high energy bills continue to foster rampant pessimism across the UK.
GfK’s monthly consumer confidence index, a long-term measure of how Britons view their personal finances and the overall economy, fell to -45 in January, a three-point drop from the previous month .
It was just four points above the record low of -49 recorded in September just before a controversial ‘mini-budget’ that caused widespread panic in the markets, but 19 points below the same month last year. .
Slowdown: Figures released by the ONS revealed that UK retail sales volumes fell again last month as shoppers became increasingly anxious to buy festive items.
Confidence in the general economy over the past 12 months remained sharply depressed, contracting a further 5 points from December to -71, while the outlook for individual finances over the same period fell to -31.
Meanwhile, the Major Purchases Index, a measure of confidence in acquiring big-ticket items, fell six points to -40, representing a 30-point drop in January 2022.
Joe Staton, director of customer strategy at GfK, remarked: “Consumers have a New Year’s hangover – but it’s economic in nature – with high levels of pessimism about the state of the economy. at large. And unlike a conventional hangover, this one won’t go away quickly.
Figures released by the Office for National Statistics on Friday revealed that UK retail sales volumes fell again last month as price rises made shoppers increasingly aware of buying festive items.
In December, food prices rose at their fastest pace since 1977, with the cost of staples like milk, cheese and eggs seeing the biggest increases.
Consumer incomes have been further squeezed by record energy bills, which have soared in response to Russia’s large-scale invasion of Ukraine and the easing of Covid-19 restrictions.
Pessimism: GfK’s monthly consumer confidence index, a long-term measure of how Britons view their personal finances and the overall economy, fell to -45 in January
Under the UK government’s energy price guarantee, a household consuming a ‘typical’ amount of gas and electricity will incur a maximum annual charge of £2,500. From April, however, that sum is expected to increase by a further £500 to £3,000.
Staton added: “With inflation continuing to swallow wage increases and the prospect of shocking energy bills landing soon, the consumer confidence forecast this year is not good.”
“One thing we can be sure of is that 2023 promises to be a bumpy ride.”
The Bank of England has implemented nine successive base rate hikes but is expected to implement another hike next month as the UK inflation rate remains at 10.5%, well in above the central bank’s target rate of 2%.
Its governor, Andrew Bailey, told Media Wales yesterday that inflation is set to ‘fall quite rapidly’ in 2023 due to falling energy prices.
His comments were echoed by consultancy group Cornwall Insight, who now estimate that annual energy bills will drop to around £2,200 from July, around £300 less than expected.