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UK shopper confidence falls to file low in September

UK shopper confidence has defied expectations of an enchancment and fallen to a brand new all-time low, as households battle beneath the strain of the price of dwelling disaster.

The patron confidence index, a intently watched measure of how folks view their private funds and wider financial prospects, dropped 5 share factors to minus 49 in September, analysis group GfK mentioned on Friday. That was the bottom since data started in 1974.

Joe Staton, GfK shopper technique director, mentioned confidence had “tumbled” in September to a brand new low as households “buckl[ed] beneath the strain of the UK’s rising cost of living crisis pushed by quickly rising meals costs, home gasoline payments and mortgage funds”.

The autumn defied expectations of a small rise to minus 42 forecast by economists polled by Reuters, who thought there can be some enchancment following the government’s £150bn package geared toward freezing family power payments.

The info come the day after the Bank of England lifted interest rates by 50 foundation factors to 2.25 per cent, the very best since 2008, which means borrowing will develop into costlier for companies and households.

“For customers already struggling to maintain their family funds in verify, the elevated value of borrowing because of the speed rise . . . could signify the breaking level, resulting in the acceleration of lower in demand,” mentioned James Brown, managing companion at international consultancy Simon-Kucher & Companions.

Incorporating the power payments freeze, the BoE expects UK inflation to peak at 11 per cent in October from its current 9.9 per cent, a close to 40-year excessive, additional eroding households’ actual incomes.

The info additionally comply with affirmation, forward of Friday’s mini-Price range, that the federal government will from November reverse the 1.25 per cent rise in nationwide insurance coverage contributions that was launched in April.

Staton mentioned the “mini-Price range, and the longer-term agenda to drive the economic system and assist rebalance family funds, will likely be a significant take a look at for the recognition of Liz Truss’s new authorities”.

The GfK index, primarily based on interviews collected within the first two weeks of the month, confirmed scores in relation to 4 of the 5 questions posed, which contact on private funds and the broader financial image, at file lows.

Ahead-looking indicators, which observe expectations for the subsequent 12 months, registered the biggest fall, dropping 9 share factors for private funds and eight share factors for the economic system.

Economists count on record-low shopper confidence to end in falling spending, a pattern registered by the BoE in its brokers survey published on Thursday.

It confirmed that meals retailers reported clients choosing cheaper items and chopping again on non-essential gadgets, equivalent to confectionery. Low cost chains gained market share, whereas gross sales of home items, equivalent to furnishings, electrical items and home-improvement merchandise, fell.

Clothes gross sales had been supported by the return to the workplace, however in hospitality, gross sales had been down on pre-pandemic ranges. Vacation reserving additionally weakened and home tourism was restricted by greater petrol costs.

Demand was robust, nevertheless, for monetary providers and authorized recommendation, equivalent to tax planning, fairness launch, debt consolidation and early compensation. Third sector organisations additionally reported a big rise in folks looking for debt recommendation.

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