Confidence among British consumers deteriorated for a fifth straight month in April, dropping to the lowest level since the 2008-’09 financial crisis, as the fall of households’ real incomes due to high inflation intensifies.
The consumer-confidence barometer compiled by research firm GfK declined to minus-38 in April from minus-31 in March, a touch off the series record low of minus-39 registered in July 2008 during the global financial crisis.
Economists polled by The Wall Street Journal expected the index to drop to minus-33.
“The cost crunch is really hitting the pockets of U.K. consumers,” GfK’s Client Strategy Director Joe Staton said.
U.K.’s annual inflation rose to a new three-decade high of 7% in March, driving a decline in real incomes that is set to be the most severe at least since the 1950s. Inflation is likely to accelerate further this month due to the jump in domestic energy prices.
All five measures that form the headline confidence index fell in April compared with the previous month. The scores looking at the outlook for personal finances and the general economy over the next year are at lower levels than the 2008 global financial crisis, and the measure gauging personal finances is also at lower levels than during the initial shock from the COVID-19 pandemic in 2020.
The major purchase index, which signals consumers’ willingness to buy big-ticket items, also fell markedly over the month.
“When rising inflation and interest rates meet low growth and declining incomes, consumers will understandably be extremely cautious about any spending,” Staton said. “There’s clear evidence that Brits are thinking twice about shopping,” he said.
A decline in confidence could suggest an incoming slowdown in consumer spending, which is a major driver of the U.K. economy. “With little prospect of any economic relief on the horizon we can only forecast further falls in the index for the year ahead,” Staton said. “From the vantage point of consumer confidence, it certainly seems like there is a recessionary mindset developing,” he said.
The GfK’s survey was carried out between April 1 and 14.