- GfK’s Consumer Confidence Barometer gave a reading of -30 for October
- ONS: Retail sales volumes across Great Britain dropped by 0.9% last month
- The UK inflation rate currently stands at 6.7%, far above the BoE’s 2% target
Consumer confidence in the UK has slumped this month as high inflation continues to pile pressure on household finances.
GfK’s long-running Consumer Confidence Barometer – which gauges how Britons view their own finances and the wider economy – gave a reading of -30 for October, a nine-point drop on September.
This was the largest fall since the outset of the coronavirus pandemic in March 2020, when the UK Government forced non-essential shops to temporarily close.
Pessimistic: GfK’s long-running Consumer Confidence Barometer gave a reading of -30 for October, a nine-point drop on September
All five of the index’s survey measures showed a decline, but the major purchase index – people’s willingness to spend on big-ticket items – has taken a particular knock, falling 14 points to -34.
Joe Staton, client strategy director at GfK, said the figures showed the cost-of-living crisis was continuing to create ‘acute pressure’ for many shoppers.
He attributed the rising unease among consumers to sky-high energy and petrol bills, as well as soaring mortgage and rental costs, the softening employment market and the current troubles in the Middle East.
It came as the Office for National Statistics revealed retail sales volumes across Great Britain dropped by 0.9 per cent last month, far worse than economists had predicted.
The decline was driven by online retailers and non-food stores, with jewellery, watches, furniture and lighting outlets observing lower demand and unusually warm weather hitting purchases of autumn clothing.
But the ONS also said consumers were putting off spending given the problems currrently 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, far above the Bank of England’s 2 per cent target.
In an attempt to get price increases under control, the BoE raised the base rate on 14 successive occasions between December 2021 and August 2023 before deciding to hold it at 5.25 per cent in September.
However, it could make further rate hikes, partly due to the recent uptick in oil prices following the start of the Israel-Hamas war and production cuts by OPEC+ members.
This would send gas and electricity costs soaring and leave Britons dealing with higher mortgage bills with even less spare cash to spend in shops, thereby slowing the UK retail sector’s recovery.
Thomas Pugh, economist at RSM UK, said: ‘With consumer confidence falling back very sharply in October and savings in real terms back to their pre-pandemic level, many consumers will choose to save any additional income rather than spending.
‘What’s more, for a large portion of households, any increase in incomes will just be eaten up by higher mortgage and rent costs, reducing their disposable income.
‘As a result, while we do expect consumer spending and retail sales volumes to gradually rise, we aren’t expecting the increase in real wages to lead to a boom in consumer spending.’