UK consumer confidence plunged to its lowest level in at least 48 years after the rising cost of living made locals more pessimistic about the energy crisis of the 1970s and the recession that lasted more than a decade due to subprime mortgages and the bursting of the financial bubble. The UK’s GfK Consumer Confidence Index hit a new low of -40 in May 2022, surpassing the previous record of -39 set in July 2008 amid growing concern over the cost of living crisis. “This means that consumer confidence is now weaker than it was in the dark days of the global banking crisis, the impact of Brexit on the economy and the lockdowns due to Covid,” said Joe Staton, director of customer strategy at GfK, candidly.
The data is at its lowest level since 1974, the beginning of the confidence record
This heavy figure comes three months after the Russian invasion of Ukraine, which sent gas and oil prices up, as well as prices of basic foodstuffs. Sentiment fell by two points to -40, according to data recorded by GfK, the lowest level since records began in 1974. Adding to pressure is the Treasury Secretary, Rishi Sunak, to help those who suffer the most. England thinks it will move cautiously in raising interest rates further. However, Bank of England Governor Andrew Bailey recently warned that rising food costs could have “doomsday” consequences.
BofA: The confidence index has always predicted a recession for the past 50 years
Economists had warned markets in April, when the index fell to -38, that such a low reading was consistent with the British economy falling into a recession, as sentiment has gone hand-in-hand with UK GDP for the past 50 years. “This correlation is consistent with many economic crises and shocks, from the stagflation of the 1970s to the financial crisis,” wrote Robert Wood, a British economist at Bank of America. “Consumer confidence is important because it provides a reliable and timely signal.” UK inflation rose to 9% in April, the highest level since the early 1980s, a figure that puts households in difficulty due to mounting pressures linked to rising energy bills and prices, the record of gasoline and the cost of shopping.
Bank of England: With inflation approaching 10%, the economy is not holding up
Official data shows that retail sales fell more than expected in March and did not stop, and the decline in spending continued in April as households grappled with a record 54% increase in utility bills for gas and electricity. The Bank of England itself warned earlier this month that the British economy was at greater risk of recession as inflation approaches 10%.
Consumer pessimism was most evident in people’s views of the economy in general, with the GfK index at -63 last year and -56 the following year. 26% of UK companies indicated that cost increases were their main concern this month, compared to 24% in April 2022, while 20% of respondents said the increase in energy prices was their biggest concern. Joe Staton, from GfK, added that “the Bank of England is also pessimistic…the outlook for consumer confidence is bleak and there is nothing on the horizon to indicate any reason for optimism anytime soon.” (All rights reserved)
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