UK consumer confidence has fallen to its lowest level since records began in 1974 amid growing concern over the cost of living crisis.
the latest GfK snapshot shows that consumers are now gloomier about their personal finances and wider economic outlook than they were during the financial crash of 2008, fearing Britain is heading into a recession.
The consumer confidence figure fell two percentage points to a record low of -40 in May, beating the previous high set during the financial crisis.
Analysts said the survey is a sign that the worst inflation in four decades threatens the recovery from the pandemic as the UK’s high street faces a tough summer as the cost of living crisis bites.
Read more: UK inflation hits 9% high in 40 years as cost of living squeeze intensifies
Inflation in the UK hit its highest level in 40 years, with consumer prices rising 9% in April, due to a 54% rise in energy bills and rising costs fuel and food exacerbated by The Russian invasion of Ukraine.
“Consumer confidence is now weaker than in the darkest days of the global banking crisis, Brexit’s impact on the economy or the COVID shutdown,” said Joe Staton, chief client strategy officer. at GfK.
Helen Dickinson, CEO of the British Retail Consortium, said stores were under pressure from pressure on family finances as well as their own suppliers.
“The drop in demand comes as consumers dominate their discretionary spending following a significant reduction in real household incomes across the UK.
“Meanwhile, retailers face higher food and commodity prices, rising shipping and transportation costs and the tightest labor market in decades.
“Until inflation is brought under control and consumer confidence returns, retailers could face tough times ahead, with weaker demand and reduced margins.”
The index measuring the evolution of personal finances over the past 12 months fell by three points to -22, 18 points lower than in May 2021.
“As prices and rates rise, consumers’ ability to spend declines,” said Linda Ellett, head of consumer markets, retail and leisure at consultancy KPMG. “Departures are scrutinized.”
The GfK figures increase pressure on Chancellor Rishi Sunak to help struggling households, and also push the Bank of England to take a more dovish stance on rising interest rates.
Earlier this week, the Chancellor said extra public spending to help consumers manage rising bills risked fueling inflation further, warning that tough times were ahead for Britain’s economy.
“We have to be careful,” Sunak said addressing business leaders at the Confederation of British Industry’s annual dinner on Wednesday evening. “At a time of severe supply restraints, an unconstrained fiscal stimulus risks making the problem worse.”
Read more: UK economic growth plummets in April as inflation hits demand
It came as retail sales unexpectedly jumped 1.4% in April, from a 1.2% drop the previous month, beating economists’ forecast of a 0.2% drop. . And this, despite inflation which rose by 9% during the month.
The recovery was driven by a 2.8% increase in grocery store sales volumes, according to the Office of National Statistics (ONS).
However, ONS deputy director for economic surveys and indicators, Heather Bovill, said “the figures still show a continuing long-term downward trend”, with overall sales falling 0.3% on the three months ending in April.