UK consumer confidence falls to record low in June

UK household confidence deteriorated again in June, hitting a record low for the second straight month, adding to concerns about a slowdown in consumer spending amid sluggish economic growth.

The consumer confidence barometer, produced by research firm GfK, fell to minus 41 in June from minus 40 in May, the lowest since the survey began in 1974, and missed economists’ expectations of a slight rise to minus 38.

The index has declined for seven straight months due to rising inflation, which has pushed consumer confidence to levels consistent with past economic recessions.

“Consumer sentiment is now more gloomy than it was in the early stages of the Covid-19 pandemic, the outcome of the 2016 Brexit referendum and even the shock of the 2008 global financial crisis, and now there is talk of a looming recession,” said GfK client Joe, Strategy Director staton.

Four of the five measures that make up the Confidence Index fell in June from the previous month, with the sharpest decline being seen in consumers’ near-term outlook for their personal finances.

“With prices rising faster than wages and the prospect of strikes and rising inflation setting the stage for a summer of discontent, many will be surprised the index hasn’t fallen further,” Staton said.

Annual inflation in the UK hit a four-decade high of 9.1% in May on rising food and energy prices, the highest rate among the wealthy Group of Seven economies. Gross domestic product contracted in both March and April, increasing the likelihood of the UK slipping into recession this year.

Households’ growing pessimism about the economy and their finances could weigh on activity as they start to scale back spending. “Britain is facing a whole new economic reality and history shows that when the going gets tough, consumers will not hesitate to tighten and tighten their wallets,” Staton said.

However, despite the cost of living crisis, UK household consumption has proved resilient in recent months as a solid labor market and strong savings from the pandemic continued to support incomes.

“While consumer spending could fall in the coming quarters, a very large and prolonged slump in spending is not necessarily to be expected,” said Nicholas Farr, associate economist at Capital Economics, in a note ahead of the data’s release.

The GfK survey, in which around 2,000 people were interviewed, was conducted between June 1st and 14th. UK consumer confidence falls to record low in June

Brian Lowry

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