British consumer confidence fell to a record low in August as cost-of-living pressures and dim economic prospects continued to build.
The consumer-confidence barometer compiled by research firm GfK declined to minus 44 in August from minus 41 in July, the lowest level since the survey began in 1974 and below economists’ expectations of consumer confidence remaining unchanged from the previous month.
All five measures fell, reflecting acute concerns as the cost of living soars, GfK client strategy director Joe Staton said. U.K. inflation hit a new four-decade high of 10.1% in July, the highest rate among the Group of Seven economies.
“With headline after headline revealing record inflation eroding household buying power, the strain on the personal finances of many in the U.K. is alarming,” Staton said.
Consumer confidence hints at households’ willingness to spend, one of the major drivers of the U.K. economy. The index measuring changes in personal finances over the past 12 months fell in August, as well as the index for personal finances over the next 12 months. The major purchase index decreased by four points in August.
The current subdued confidence levels have historically been associated with economic recessions. The U.K. economy contracted in the second quarter as households facing soaring inflation cut back on spending. The Bank of England expects the U.K. will enter a recession in the final three months of the year and won’t exit it until the start of 2024.
The sub-measure on the general economy over the past year has decreased month-on-month since December 2021 and a similar consistent sharp decline since December 2021 is evident in how consumers see the economy a year ahead. August’s reading of minus 60 sets a record low.
The GfK survey, which polled around 2,000 individuals, was carried out between Aug. 1 and 12.