Consumer confidence in the UK plunged in August to its lowest level in almost 50 years as the concerns about a recession increased and soaring inflation tightened a squeeze on UK households.
The August index score for overall consumer confidence decreased by three points in August to minus 44, the lowest level since comparable records began in 1974, according to GfK’s Consumer Confidence Barometer.
All five measures — which include confidence in personal finances, general economic outlook, and savings — were down in comparison to the same time last month.
A "sense of exasperation" about the economy was the biggest driver behind the fall, according to the index.
The public's forecast for the next 12 months is also gloomy, recording a heavy fall in recent months to a new low of minus 60.
Similarly, confidence in the economy for the year ahead has also seen a consistent sharp decline over the same period, falling to a new low of minus 60.
The forecast for personal finances over the next 12 months fell five points on July to minus 31 — some 42 points lower than this time last year.
The Major Purchase Index, a measure of confidence in buying big ticket items, fell by four points in August to minus 38 — a total of 35 points lower than this time last year.
“A sense of exasperation about the UK’s economy is the biggest driver of these findings. Our sub-measure on the general economy over the past year has decreased month-on-month since December 2021,” Joe Staton, GfK’s client strategy director, said.
These findings point to a sense of capitulation, of financial events moving far beyond the control of ordinary people.
“With headline after headline revealing record inflation eroding household buying power, the strain on the personal finances of many in the UK is alarming.
“Just making ends meet has become a nightmare and the crisis of confidence will only worsen with the darkening days of autumn and the colder months of winter,” he added.
Linda Ellett, UK head of consumer markets, retail and leisure at KPMG, said the decline in confidence was likely to weaken retail sales soon even though the figures have held up so far this year.
“So far this year, retail sales have somewhat defied the very low levels of consumer confidence. But a widespread reduction in spending ability will lead to drops in demand and changing buying behaviour, both of which will impact the high street and wider economy,” she said.
“The scale of the demand reduction remains unknown, but retailers do know that there will be various trade-down audiences and treat occasions.
“The key to weathering this storm is to try and capture and retain those customers — from those seeking out more value products, through to those swapping meals out for premium range meals in,” she added.
Sales also fell by 1.2% in the three months to July, as people continued to cut down on non-essential spending. Retail sales volumes nudged up slightly in July, by 0.3%, after a slight fall in June.
The bleak outlook comes in the face of the fastest price rises in 40 years.
Rocio Concha, Which? director of Policy and Advocacy, said: “Consumer confidence has taken a battering as millions of people face a stark financial situation this winter. With bills set to rise even further, it’s clear that the current level of cost of living government help will not be sufficient.
“The government must do more to support those who are struggling and increase the amount of economic support for families and households so they can make ends meet.
“Businesses in essential sectors, such as supermarkets, energy and telecoms, should also do everything in their power to make sure customers are getting a good deal, and look at what more they can do for those facing serious financial hardship.”