Consumer confidence falls to lowest level on record as inflation fears escalate Business News

Consumer confidence has plunged to its lowest level on record as households face a “brutal new reality”, a report has warned.

GfK’s consumer confidence index fell one point in June to minus 41, the lowest level the survey has recorded since its launch in 1974.

Confidence in the economy for the next 12 months fell one point to minus 57 – down 55 points from last year.

People’s confidence in their personal finances fell three points to minus 28 – 39 points lower than at the same time last year.

The major purchases index, a measure of confidence in buying big-ticket items, remained at minus 35, bringing it 30 points below last June’s figure.

It came as a separate report on business expectations signaled that a recession was on the way.

The latest S&P Global/CIPS UK flash Purchasing Managers’ Index (PMI) survey showed a drop in business confidence.

Expectations fell at the fastest monthly rate since the start of the pandemic, indicating that growth remained at its lowest level in more than a year in June.

The report showed a reading of 53.1 for June, unchanged from the 15-month low recorded in May. A reading above 50 indicates growth.

S&P warned that such a low level of business optimism has historically “signalled an impending recession” is on the way.

Chris Williamson, chief economist at S&P Global Market Intelligence, said the economy was starting to look like it was “running on empty”.

He added: “The weak broad flow of economic data so far in the second quarter points to a drop in GDP [gross domestic product]which, according to forward-looking PMI figures, will accelerate in the third quarter.

The outlook for the UK economy has deteriorated rapidly this year, with households and businesses hammered by huge increases in food, fuel and energy costs.

Further increases are expected later this year, with inflation expected to reach 11%. The Bank of England now expects the economy to contract in the second quarter of the year.

A summer strike threatens to deal another blow. Railway workers came out this week, forcing shoppers to stay home. Footfall on main streets was 16.1% lower at 1 p.m. Thursday compared with the same day last week, and down 8.5% on Tuesday, retail analysts Springboard said.

In central London, the drop from last week was more than double the national average, down 34.4%, compared to a drop of 27% on Tuesday.

Compared to 2019 before the pandemic, footfall was down 32.9% on all high streets on Thursday, down from a 19.6% drop on Tuesday, and down 52.1% in central London, down from a drop of 49.2% on Tuesday.

GfK’s Joe Staton said: “With prices rising faster than wages, and the prospect of strikes and runaway inflation causing a summer of discontent, many will be surprised that the index has not yet decrease.

“Consumer sentiment is currently gloomier than at the start of the Covid pandemic, following the 2016 Brexit referendum, and even the shock of the 2008 global financial crisis, and now there is talk of a impending recession.

“One thing is certain: Britain is facing a new economic reality and history shows that consumers will not hesitate to entrench and tighten their purse strings when the going gets tough.”

Linda Ellett, UK head of retail and consumer leisure markets at KPMG, said while consumer confidence continues to plummet, total retail sales are not falling as rapidly.

Rising prices prompted people to cut back on some discretionary items. “But there are tailwinds still supporting spending elsewhere, in the form of high employment, pandemic savings levels and a desire for experience-based spending,” Ms. Ellett said.

“Travel, Hospitality and Recreation Expenditures [are] stimulate sales of clothing, footwear and accessories, but could be a seasonal effect that weakens at the end of the summer.

“As core costs continue to rise, so does the risk that additional demand for discretionary goods will decline in line with the still low levels of consumer confidence we are seeing.”

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This notice was published: 2022-06-23 23:01:00

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