Key indicators of future consumer confidence took a sharp dive in September as Brits anxiously awaited policy announcements in the forthcoming Autumn Budget, according to newly released data.
GfK’s long-standing consumer confidence index plummeted to -20 in September, with all measures, including personal finances, the economy, and purchase intentions experiencing a month-on-month decline. ‘Headline consumer confidence has… taken us back to a similar level seen at the beginning of this year,’ stated Neil Bellamy, consumer insights director at GfK. Despite stable inflation and the prospect of further cuts in the base interest rate, this is not encouraging news for the UK’s new government.
On Thursday, the Bank of England decided to maintain interest rates at five per cent as it persisted with its policy of gradually reducing borrowing costs. Significant adjustments were observed in the outlook for personal financials for the next 12 months, which dropped nine points. Consumers’ views on the general economy for the upcoming year fell 12 points, and the major purchase index declined by ten points.
The surge in consumer confidence this summer, following the first interest rate cut since March 2020, appears to have been eclipsed by concerns around policy changes in the Autumn budget, which the Government has warned will be ‘tough’. Prime Minister Keir Starmer and Chancellor Rachel Reeves have also expressed concerns about the dire state of the UK’s finances, which commentators warned would impact consumer sentiment. Bellamy remarked, ‘Strong consumer confidence matters because it underpins economic growth and is a significant driver of shoppers’ willingness to spend.’
He also noted, ‘Following the withdrawal of the winter fuel payments, and clear warnings of further difficult decisions to come on tax, spending and welfare, consumers are nervously awaiting the budget decisions on 30 October.’ The report highlighted a decline in the major purchase index, which dropped by ten points month on month to -23, indicating that UK consumers are increasingly reluctant to invest in substantial items such as home improvements.
Additionally, the savings index experienced a decrease of ten points to +23, maintaining the same level as the previous year at this time.
The latest survey underscores a heightened sense of uncertainty among UK consumers, who await impending budgetary decisions with apprehension. This decline in consumer confidence is a significant concern, reflecting broader anxieties about personal finances and the overall economic outlook.