UK consumer confidence hits record low as cost of living bites

·Business Reporter, Yahoo Finance UK
·3 min read
People carrying shopping bags in Bournemouth. UK consumer confidence fell again
Consumer confidence fell in September amid concerns about personal finances and the economy over next 12 months. Photo: PA.

UK consumer confidence slumped to a record low in September amid deep concerns about personal finances and the economy over next 12 months.

According to GfK’s consumer confidence barometer, the index decreased by five points this month to -49, the worst overall score since records began in 1974.

The reading marked the fourth new low out of the last five months, with all measures once again severely depressed.

Four measures were down in comparison to the August announcement, while one remained flat.

The overall index score hit its lowest ever recorded. Chart: GfK
The overall index score hit its lowest ever recorded. Chart: GfK

The two key future-facing indicators on personal finances in the coming year, and on the economy in the next 12 months, were both down. They were down nine points to -40, and eight points lower at -68, respectively.

“These numbers are where many forecasters look for signs of economic optimism among consumers and the results deliver very bad news in that respect,” GfK said.

The index measuring changes in personal finances over the last 12 months fell three points to -28, some 24 points worse than September 2021, while the measure for the general economic situation of the country during the last year fell four points to -72.

This was 29 points lower than in September 2021.

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The data also revealed that the major purchase index remained unchanged this month at -38, 32 points lower than the same month a year ago.

However, the savings index slumped seven points this month to +11, coming in at 11 points lower than this time last year.

“Consumers are buckling under the pressure of the UK’s growing cost-of-living crisis driven by rapidly rising food prices, domestic fuel bills and mortgage payments. They are asking themselves when and how the situation will improve.” Joe Staton, client strategy director at GfK, said.

“Today’s mini-budget, and the longer-term agenda to drive the economy and help rebalance household finances, will be the first major opportunity to deliver that improvement. It will also be a major test for the popularity of Liz Truss’s new government.”

Read more: What can we expect from Kwasi Kwarteng's mini-Budget

It comes as UK inflation is still hovering around double-digit figures, and is expected to climb higher in the coming months.

It is currently almost five times above the Bank of England’s (BoE) 2% target, at 9.9%.

According to the Office for National Statistics (ONS) earlier this month, the UK’s rate of inflation eased in August after registering a double digit increase for the first time in more than four decades the month before.

This was below economists’ expectations, however core prices, which exclude volatile items like energy and food, ticked up to 6.3% from 6.2%, suggesting price rises are firmly embedded across the economy.

Watch: How does inflation affect interest rates?