UK consumer confidence is at its lowest sustained level in almost 50 years, as the country braces for a prolonged recession, according to a closely watched survey.
The consumer confidence index, a measure of how people view their personal finances and wider economic prospects, edged up only two points to minus 42 in December compared with the previous month, said research group GfK on Friday. The average since the index started is minus 10.
Over the past year, Britons have been hit by soaring prices that are stretching household budgets across the country. Energy prices jumped after Russia’s invasion of Ukraine in February and many consumers have been left with little money after paying for energy and food bills.
Since the survey began in 1974, the index had never fallen below minus 40 until May 2022, with the onset of double digit inflation. It has remained below that level, marking the most prolonged period of low confidence in almost half a century.
Joe Staton, client strategy director at GfK, warned “of a tough road ahead” because of the UK’s gloomy economic outlook. “Real wages are falling as inflation continues to bite hard, further straining the discretionary budget of many households as we enter the last few shopping days before Christmas,” he added.
Inflation eased marginally to 10.7 per cent in November from a 41-year high of 11.1 per cent in October. Food inflation rose to 14.6 per cent, the highest since 1980.
The UK economy contracted in the third quarter with business surveys, such as the purchasing managers’ index, pointing to further economic deterioration in the last quarter.
Both the Bank of England and the Office for Budget Responsibility have forecast a prolonged recession as high inflation continues to hit households’ finances in 2023.
Linda Ellett, UK head of consumer, retail and leisure at KPMG, said that “whilst Christmas will bring some feel-good respite, the fundamentals that are driving this low consumer confidence will continue into the new year”.
The GfK survey, based on data collected over the first 10 days of December, showed that Britons’ confidence in their personal finances next year remained at the lowest level on record.
As a result, nearly two in three people have reduced non-essential spending and are using less energy in their homes, according to an ONS survey published on Thursday. Nearly half of the respondents said they were buying less food.
Staton said that with “no immediate prospect of fiscal good news, it is unlikely we will see a rebound in confidence any time soon”.