Fears that Britain is heading for a sharp slowdown in consumer spending intensified when it emerged that the public is gloomier about the economy than when banks were on the brink of collapse during the the financial crisis of 2008.
A combination of skyrocketing energy prices, higher taxes and a spike in the annual inflation rate to its highest level in three decades meant confidence was in freefall, according to the latest monthly overview. of feeling.
Labor has called on Rishi Sunak to do more to tackle the cost of living crisis after all five measures of consumer confidence tracked by polling firm GfK recorded sharp declines in April – a month that saw raising the ceiling on energy prices and an increase in national insurance contributions.
Abena Oppong-Asare, Shadow Exchequer Secretary to the Treasury, said: “These worrying figures are sadly no surprise, given that families are suffering the double whammy of a huge tax hike from the Tories and the skyrocketing energy bills.
“The collapse in consumer confidence shows how much the cost of living crisis is weighing on growth. How many warnings like this does the Chancellor need to grasp the seriousness of the cost of living crisis?
The report found the public was more pessimistic about their own finances, the state of the economy and their willingness to spend money on big-ticket items such as cars.
The overall consumer confidence index – a combination of the five individual measures – fell seven points to -38 in April. A year ago, the figure was -15.
Joe Staton, director of customer strategy at GfK, said: “The cost crisis is really hitting the pockets of UK consumers and the overall trust score has fallen to near historic lows.
“The next 12 month scores for our personal finance at -26 and the general economy at -55 are worse than the financial crash of 2008. The personal finance score for the next year is also worse than the initial Covid shock in 2020.
“When rising inflation and interest rates meet weak growth and falling incomes, consumers will understandably be extremely cautious about any spending. There is clear evidence that Britons are thinking twice about shopping, as the plummeting Major Buys Index shows – now is not seen as a good time to buy. This is bad news for consumer confidence and with little prospect of an economic recovery on the horizon, we can only expect further declines in the index for the coming year.
A separate survey by consultancy KPMG found that a third of consumers spent less in 2022, with particularly steep declines in clothing purchases and dining out.
Andrew Goodwin, UK chief economist at consultancy Oxford Economics, said: “We shouldn’t be surprised if GDP falls in the second quarter given the likely impact of the additional bank holiday. [for the Queen’s platinum jubilee] and the loss of Covid testing support.
But talk of a recession in the UK seems premature, not least because there will be a mechanical rebound in the third quarter, as it will have a full quota of working days. Yet mounting pressure on household finances means the UK economy is set to have a bumpy ride through the rest of 2022.”