Consumer confidence in the UK has fallen to a 13-month low as the country faces a cost-of-living squeeze and soaring inflation.
According to GfK’s consumer confidence barometer for February, the index slumped seven points to -26, with all measures down in comparison to the 21 January announcement.
This was the lowest headline score since January 2021, and one of the worst readings during the COVID crisis.
The index measuring changes in personal finances over the last 12 months decreased five points to -11, three points worse than February 2021, while the forecast for personal finances over the next year fell 12 points to -14. This was 18 points lower than this time last year.
The data, which surveyed 2,000 people between 1 and 14 February, also revealed that the measure for the general economic situation of the country during the last 12 months is three points lower at -50, some 14 points higher than in February 2021.
Meanwhile, expectations for the general economic situation over the coming year dropped by 11 points to -43; this is 13 points lower than February 2021.
GfK also said that the major purchase index slumped by five points to -15 in February, four points higher than it was this month last year, while the savings index has gone down by one point to +14 in February.
“Fear about the impact of price rises from food to fuel and utilities, increased taxation and interest rate hikes has created a perfect storm of worries that has shaken consumer confidence,” Joe Staton, Client Strategy Director GfK said.
“There’s clear anxiety in these findings as many consumers worry about balancing the household books at the end of the month without going further into debt. Slowing consumer spend slows the wheels of the UK economy so this is unwelcome news.
“And the good news on the easing or lifting of COVID restrictions around the UK seems to be doing little to lift the public’s mood.”
It comes as the UK inflation rate rose by 5.5% in the 12 months to January, up from 5.4% in December 2021, reaching a near 30-year high.
This was ahead of the 5.4% figure that economists expected, adding to the current cost of living squeeze. The inflation rate is currently more than double the Bank of England’s 2% target.
The central bank warned earlier this month that consumer price inflation could peak at about 7.25% by April when a 54% surge in energy bills is due to take effect, and the chancellor’s tax rises come into place. But the Bank has so-far underestimated the extent of inflation in previous forecasts.
UK inflation is still being dominated by energy prices, and the prices of a select number of goods, which were heavily affected by the pandemic.
Threadneedle Street is expected to raise interest rates in March, as well as several times this year. It will make its next monetary policy announcement on 17 March.
Following Russia's invasion of Ukraine, Samuel Tombs at Pantheon Macroeconomics said a sustained rise in energy prices could drive consumer price growth to 8.2% in April, falling only to 6.5% by the end of the year.
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