Consumer confidence has plummeted as concerns grow over whether households will be able to afford rising utility, food and fuel bills.
Confidence, measured in monthly barometers by GfK, dropped two points to minus 40, the lowest score since the record began in 1974. An online survey of 2,000 over-16s this month found that emotion was lower than theirs. The peak of the financial crisis in July 2008, when the barometer reached minus 39.
Consumers have little hope for a broader economic outlook, which shrunk in March and is expected to shrink further this year. The chances of them buying big-ticket items like furniture or electrical products have decreased over the last six months.
Prices have risen at their fastest rate in 40 years, with inflation reaching 9 percent since April.
Households are facing a 54 percent increase in energy bills, which will increase further. The Bank of England expects inflation to exceed 10 per cent in October when fuel prices are lifted for the second time this year.
Take-home salaries are set to fall 2.2 percent this year, the highest number since the record began in the 1950s, according to the Office for Budget Responsibility.
Expectations for next year’s general economic situation in the GfK survey fell one point to minus 56. This is 60 points less than a year ago. The key buying index, which measures respondents’ likelihood of buying expensive products, fell 3 points to minus 35. This is 28 points less than last May.
Joe Staton, GfK’s Client Strategy Director, said that “the darkest days of the global banking crisis” and consumer confidence were weaker than the cowardly shutdown. He added: “Even the Bank of England is pessimistic. The outlook for consumer confidence is bleak, and nothing on the economic horizon soon shows cause for optimism. “
Andrew Bailey, the bank’s governor, told lawmakers on Monday that it was “very, very uncomfortable” that monetary policy could do little to reduce inflation, largely driven by external factors such as the war in Ukraine.
“It’s a very difficult place to say that 10 percent will be inflation and 80 percent of that we can do nothing,” he said.
Business confidence has also been damaged since manufacturers returned investment plans since the war in Ukraine. According to the CBI’s Industrial Trends Survey, investment plans for buildings, plants and machinery remain weak.
Output in the manufacturing sector increased, but is expected to decline in the next quarter as rising costs shrink consumer spending and push up prices.
According to Lloyds Bank’s Sector Tracker, growth slowed in April, with eight of the 14 sectors growing at a slower rate than the previous four months. A survey of private sector companies found that 11 sectors recorded weaker demand than in March last month.
Lloyds Bank’s head of commercial banking economics and market insights, Javan Lলেley, said: “As the cost of living increases, consumers are becoming more conservative about spending, which has a direct impact on business productivity growth.
“Businesses are also struggling with sharp spending pressures, with firms reporting price increases to maintain margins with record shares.”