UK consumer confidence hit by concerns over rising cost of living
GfK’s consumer confidence index for September has plunged five points to -13, as Brits worry about the rising prices of fuel and food.
All measures, including the index measuring changes in personal finances and the savings index, were down in comparison to last month, but up when compared to September 2020.
"When consumer confidence drops, shoppers tend to spend less, and this dampens the overall economic prospects for the UK. This really is an unwelcome picture if this continues into 2022 and beyond,” said Joe Staton, client strategy director at GfK.
He said the drop came “on the back of concerns about rising prices for fuel and food, the growth in headline inflation, tax hikes, empty shelves and the end of the furlough scheme".
Other factors that may have contributed to this drop are an increase in national insurance contributions and a shortage of consumer goods driven by a variety of factors including a lack of CO2, said Linda Ellett, head of consumer markets, leisure and retail at KPMG UK.
"It’s impossible for consumers to ignore the challenges all around us."
The index measuring changes in personal finances over the last 12 months dropped four points to -4, three points better than September 2020.
Read more: Bank of England holds interest rates at 0.1% while inflation prediction bumped to 4%
The forecast for personal finances decreased six points to 5, four points higher than this time last year.
Meanwhile, the measure for the general economic situation of the country during the last 12 months is down one point at -43, but 18 points higher than in September 2020.
Expectations for the general economic situation have fallen by 10 points to -16. Again, this is still 22 points higher than last year.
The major purchase index decreased by three points to -6.
Even though its 15 points higher than it was this time last year, Staton said this was "depressing news for hard-pressed retailers looking to build sales as they go into the key holiday period”.
Ellett said that many retailers are ramping up for the festive season. "It remains to be seen quite how many challenges they face and how this will be received by consumers, who are preparing to spend big after last year’s cancellations, but who may be left frustrated by a lack of choice and availability."
The savings index was down three points to 22 in September; two points higher than this time last year.
The Bank of England said on Thursday that CPI inflation was projected to rise temporarily in the near term, to 4% in 2021 Q4, largely to energy and goods prices.
It expects CPI inflation to fall back close to the 2% target in the medium term.
The bank opted to keep interest rates on hold at 0.1%.
Market watchers have previously warned that an interest rate rise at the wrong time could tip many borrowers over the edge into more debt and put the breaks on recovery.
Recent soaring gas prices and price inflation due to supply chain issues will have complicated the picture in the future rate path.
Watch: What is inflation and why is it important?
