UK consumer confidence fell the most since the start of the coronavirus pandemic as cash-strapped households felt the impact of persistent inflation and higher interest rates.
GfK Ltd. said its gage of consumer sentiment declined 9 points to minus 30 in October. The drop was the largest since April 2020, which captured the period when the UK started its first Covid lockdown. It’s comparable to the dip experienced after the UK voted to leave the European Union in 2016.
The result was much sharper than the 1-point drop economists had expected and reverses the unexpected improvement recorded in September. Britain is suffering the worst bout of inflation in the Group of Seven nations, prompting the Bank of England to lift its benchmark lending rate to the highest level since 2008.
It’s a problem for retailers hoping for higher sales in the run-up to Christmas.
“The fierce headwinds of meeting the accelerating costs of heating our homes, filling our petrol tanks, coping with surging mortgage and rental rates, a slowing jobs market and now the uncertainties posed by conflict in the Middle East, are all contributing to this growing unease,” Joe Staton, client strategy director at GfK, said in a statement Friday. “The volatility we are seeing in consumer confidence is a sure sign of a depressed economic mood, and there’s no immediate prospect of any improvement.”
GfK’s confidence indicators on the economic outlook, personal finances and making big-ticket purchases all deteriorated, even though all are still above last year’s levels.
The cost-of-living crisis is already hitting Christmas shopping plans. More than a third of Britons want to spend less than they did last year on Christmas gifts and meals, according to separate research from KPMG. Consumers cutting back on on groceries, eating and drinking out, were most commonly aged 35 to 44, KPMG found in a survey of 2,500 consumers in September.
“Even for those spending the same, the volumes that they receive may well be less due to inflation,” said Linda Ellett, UK head of consumer markets, retail and leisure at KPMG.