Consumer confidence in the UK fell 11 points in October to minus 24, the GfK index showed. This is the sharpest monthly decline since July 2016, excluding the pandemic period, and reverses the recovery in sentiment seen in the previous three months.
All the main components of the indicator deteriorated compared to September. The sharpest decline was in intentions to make big purchases, which fell 14 points. The index measures households' willingness to buy goods such as furniture, washing machines and other more expensive products. The assessment of the economic situation over the next 12 months also fell by the same amount. The savings index rose by one point, but it did not contribute to the overall result.
„The speed of deterioration is worrying“
„There was an extraordinary collapse in consumer confidence in October“, said Neil Bellamy, director of „Consumer Analysis“ at GfK. According to him, the results are unfavorable for the government, which places economic growth among its main priorities.
GfK reports weakening attitudes across income, age and gender groups. This means that the decline is not limited to one specific group of households, but is seen more broadly in consumer behavior.
Inflation and budget limit the scope for response
The data comes against the backdrop of accelerating inflation in the UK. Consumer prices rose by 3.5% year-on-year in September compared to 3.1% in August, the highest level in the last 11 months. Higher fuel prices are among the factors behind the acceleration.
The labor market is also showing signs of weakening. Job vacancies fell to 691,000 in the July-September period. According to the Office for National Statistics, this is the lowest level outside the pandemic since July-September 2014.
Against this backdrop, the UK's public debt has exceeded 3 trillion pounds for the first time. Government finances are limiting the scope for broad measures to support households, and Chancellor John Healy is due to present the Budget on 28 October.
The drop in confidence is putting pressure on consumption ahead of the Budget and the key winter season for retailers. If households postpone purchases of more expensive goods, this could affect trade turnover and expectations for economic growth. GfK data shows that the summer optimism has disappeared before the government presents its new financial measures.
Sources: dailymail.com, marketscreener.com, apnews.com