Consumer confidence plunges to lowest level on record as cost of living soars Business News

Consumer confidence has fallen to its lowest level in nearly half a century, as soaring prices put further pressure on household budgets.

A long-running survey of people’s views on the economy and their personal finances revealed more pessimism than at any time in its 48-year history.

The GfK Consumer Confidence Index fell to minus 40 in May from minus 38 in April. This surpassed the previous low reached of minus 39 recorded during the July 2008 financial crisis.

It came as inflation hit a 40-year high of 9%, largely thanks to huge increases in energy and food bills.

Rishi Sunak faced fresh calls this week for urgent action to bolster consumer confidence, amid warnings that a sharp drop in spending would push the UK into recession.

The chancellor has told the Confederation of British Industry (CBI) he will consider tax cuts in his autumn budget, but many pundits have called for action to be taken immediately, putting the focus on direct financial assistance to people in difficulty.

GfK found that consumers were more pessimistic about the economy as a whole than about their own personal financial situation.

Confidence in personal finances over the past 12 months has fallen three points to minus 22 – 18 points lower than the same period last year.

The index fell to minus 63 when people were asked about the performance of the general economy over the past year, and to minus 56 for the year ahead.

Joe Staton, GfK’s Chief Client Strategy Officer, said: “The May result is one point lower than the previous record set in July 2008, when the overall score dipped to minus 39.

“It means consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy or the Covid shutdown.

“The outlook for consumer confidence is bleak and nothing on the economic horizon gives cause for optimism anytime soon.”

Linda Ellett, UK head of retail and leisure consumer markets at KPMG, said: “The cost of living squeeze is, of course, stronger for some consumers than for others. Of those we surveyed, a third of consumers who started 2022 with savings are tapping into it to help cover essential monthly expenses.

“But two-thirds of consumers with savings still plan to spend some on the things they want in 2022. It seems vital to the high street that in the months ahead, this group remains willing and able to spend.”