Consumer confidence ‘seriously depressed’ amid soaring food and fuel prices

Consumer confidence remains “severely depressed” as households grapple with soaring food and fuel prices, a survey has found.

GfK’s long-running consumer confidence index languished at an all-time low of minus 41 in July, despite hopes for personal finances rising two points over the next 12 months.

Confidence in the general economic situation over the past 12 months fell one point to minus 66, 23 points lower than in July last year, but expectations for the next 12 months remained at minus 57 , 52 points less than 12 months ago.

The major purchases index, a measure of confidence in buying big-ticket items, rose one point to minus 34, down 36 points from this month last year.

Joe Staton, director of client strategy at GfK, said: “Consumer confidence remains severely depressed this month as the impact of soaring food and fuel prices and rising interest rates continues to cloud the nation’s financial mood.

“Despite a two-point rise in our hopes for our personal financial situation for the next 12 months, which may reflect optimism about imminent change at the top of the UK government, the overall index languishes at an all-time low amid serious concerns for the general economic situation.

“In this financial environment, the British electorate is looking for a new leadership that is committed to unleashing growth, tackling inflation and cutting taxes. The successful candidate will be expected to provide a much-needed boost in the economic arm of the country if they are to help improve consumer confidence.

Meanwhile, Deloitte separately found that the rising cost of living has caused consumer confidence to fall below the previous record set during the March 2020 lockdown to an all-time low.

Rising inflation forced Deloitte’s latest Consumer Tracker, compiled immediately after UK interest rates rose to 1.25%, to minus 19% in the second quarter as consumers were the most pessimistic about their disposable household income.

Additionally, 62% of consumers are now spending more, compared to 49% at the same time last year. Of these, 86% say their increased spending is specifically due to rising prices.

Adjusted for the whole population, this means that the rising cost of living is now driving up spending for more than half (53%) of all UK consumers.

Sentiment around the state of the economy fell to minus 83%, the lowest level since the start of the Covid-19 pandemic, when the measure hit an all-time low of minus 88%.

Celine Fenech, head of consumer insights at Deloitte, said: “With inflation rising faster than average incomes, there are now more consumers feeling the pinch in the cost of living than not. In a sign of the times, the biggest increase in spending this quarter is in energy and housing costs, including rents and mortgages.

“The current situation means that consumers are changing their shopping behaviors significantly to adapt. This may simply be buying less, switching to cheaper brands or stores, and postponing large purchases. Some also see an opportunity in the resale and purchase of second-hand goods.

Simon Oaten, Partner for Hospitality and Leisure at Deloitte, said: “The return of summer events, many for the first time in three years, has responded to pent-up demand from leisure consumers. From weddings at full capacity to cricket and live music, consumers have clearly appreciated the return to a “normal” summer schedule, helped in many cases by good weather.

“However, the outlook for the next quarter is less sunny, with consumers indicating they will reduce spending across all leisure categories.

“Until then, many continue to book long-awaited holidays and hotel stays, both overseas and in the UK. The speed of the recovery could be hampered by further disruptions to the UK’s transport network.

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