U.K. consumer confidence falls in June to record low

Confidence among British households deteriorated again in June, hitting an all-time low for the second month in a row and raising concerns of a decline in consumer spending amid slow economic growth.

The consumer confidence barometer compiled by research firm GfK fell to minus 41 in June from minus 40 in May, the lowest level since the survey began in 1974, without the expectations of economists of a slight increase to minus 38.

The index has been falling steadily for seven consecutive months due to rising inflation, which has brought consumer confidence to levels that have been consistent with economic recessions in the past.

“Consumers’ moods are currently darker than in the early stages of the Covid-19 pandemic, the result of the 2016 Brexit referendum and even the shock of the 2008 global financial crisis, and now there is talk of a recession approaching, ”the GfK client said. said strategy director Joe Staton.

Four of the five measures that make up the confidence index declined in June compared to the previous month, with the sharpest fall in the short-term outlook for consumers on their personal finances.

“With prices rising faster than wages and the prospect of strikes and spiraling inflation causing a summer of discontent, many will be surprised that the index has not fallen further,” Staton said.

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

The growing pessimism of households about the state of the economy and their finances could weigh on activity if they begin to cut spending. “The UK is facing a new raw economic reality and history shows that consumers will not hesitate to cut and tighten the laces of their bag when things get tough,” Staton said.

However, consumption in British households has shown resilience in recent months despite the cost-of-living crisis, as a solid labor market and large pandemic savings continued to support income.

“While consumer spending may fall in the coming quarters, a very large and prolonged drop in spending is not necessarily forecast,” Deputy Capital Economics economist Nicholas Farr said in a note before the release of data .

The GfK survey, which surveyed some 2,000 people, was conducted between 1 and 14 June.

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