Joe Staton, client strategy director at GfK, said: “The outlook for consumer confidence is gloomy, and nothing on the economic horizon shows a reason for optimism any time soon.”
GfK’s findings came despite a surprise rise in retail sales in April. Expectations that sales would crash yet again proved unfounded as official data published on Friday morning showed transactions rose 1.4% in April, following a 1.2% drop in March.
Analysts had expected the rise in both national insurance contributions and the energy price cap last month to cause consumers to reel in their spending.
Oliver Vernon-Harcourt, head of retail at Deloitte, added: “Just because overall spending is rising doesn’t mean that this is true for everyone and higher income households are likely to account for a disproportionate share of spending. Spending power could weaken further for many in the months ahead.”
Sales were still down 0.3% across the three months to the end of April.
Silvia Rindone, UK and Ireland retail lead at consultancy giant EY, warned: “Retailers are now facing a combination of high inflation and supply chain and demand headwinds which will create a challenge for the sales growth that has helped drive the post-pandemic recovery so far.”
GfK found the public felt their personal financial situation had gotten worse in May and the index measuring changes in personal finances over the last 12 months decreased three points to minus 2.
Confidence in the economy also took a battering, down three points at minus 63.
Expectations for the general economic situation over the coming year dropped by one point to minus 56. The measure for those wanting to make a major purchase dropped three points to minus 35.
The data is likely to pile more pressure on Chancellor Rishi Sunak to intervene and help struggling Brits with the cost of living crisis. Businesses are concerned that plummeting confidence could push the UK into recession as households rein in spending and save cash.
Staton said: “The GfK consumer confidence barometer recorded a headline score of minus 40 in May, the worst since our records began in 1974.
“This comes as UK unemployment hits a 50-year low with vacancies outnumbering job seekers for the first time, and inflation peaking at a 40-year high driven by soaring food and fuel bills.”
On Wednesday, US stock markets suffered their sharpest fall in two years after major retailers Target and Walmart reported weak earnings. That sparked fears of a slowdown in consumer spending.
Earlier this month Bank of America said its survey of UK consumers found shoppers were looking to rein in spending on clothing and eating out, “especially consumers with below average income.”