Soaring energy prices, tax hikes and bare supermarket shelves triggered a slump in household confidence this month as fears of rising living costs took their toll on shoppers.
Consumer confidence fell to a five-month low, and its second consecutive drop, in September, according to GfK’s closely watched gauge, sinking five points to a reading of minus 13, its lowest level since the reopening started.
The indicator measures the difference between consumers feeling optimistic and pessimistic on a range of factors.
There was a plunge in consumers’ optimism over the economic outlook over the next 12 months amid fears over a resurgent rise in inflation.
Joe Staton at GfK said: “On the back of concerns about rising prices for fuel and food, the growth in headline inflation, tax hikes, empty shelves and the end of the furlough scheme, September sees consumers slamming on the brakes as those already in economic hardship anticipate a potential cost of living crisis.”
Households are bracing for a tough winter of higher energy bills, inflation of more than 4pc and supply chain chaos that is leaving gaps on retailers’ shelves.
Optimism is higher than it was a year following the vaccine rollout but has cooled notably since the summer’s highs.
Mr Staton highlighted a large fall in its major purchase index while consumers also judged their personal finances had deteriorated as costs climbed.
“When consumer confidence drops, shoppers tend to spend less, and this dampens the overall economic prospects for the UK. This really is an unwelcome picture going into 2022 and beyond,” he added.
The Bank of England yesterday revised up its inflation forecasts yesterday as supply chain woes, worker shortages and climbing energy costs ramp up the pressure on households. It expects inflation to surge above 4pc, more than double its 2pc target, and remain there well into next year.
The Bank’s rate-setters admitted that the recent surge in gas prices is “an upside risk to the MPC’s inflation projection from April 2022”.
It said that most other cost pressures have “remained elevated” but argued that the pick-up in inflation will prove temporary. Other economists are less optimistic and financial markets are bringing forward their expectations for an interest rate rise to contain inflationary pressures.
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