Consumer confidence drops to lowest level since 1974

UK consumer confidence has fallen to its lowest level since records began in 1974, according to the latest figures from GfK’s long-running Consumer Confidence Index.

For the month of May, the index decreased by a further two points to -40 as four of the five measures that make up the index decreased.

It revealed the index measuring changes in personal finances over the last 12 months decreased three points to -22. This is 18 points worse than the same period in 2021.
The forecast for personal finances managed to increase by one point to -25, however this is 35 points lower than this time last year.

Notably, the measure for the general economic situation of the country during the last 12 months is down three points at -63; this is 15 points lower than in May 2021. In addition, expectations for the general economic situation over the coming 12 months dropped by one point to -56, marking a 60 point drop compared with the same time last year.

GfK added that the Major Purchase Index also decreased three points to -35 in May and the the Savings Index stagnated at +10 – 12 points lower than this time last year.

Joe Staton, Client Strategy director, GfK says: “The GfK Consumer Confidence Barometer recorded a headline score of -40 in May, the worst since our records began in 1974. This comes as UK unemployment hits a 50-year low with vacancies outnumbering job seekers for the first time, and inflation peaking at a 40-year high driven by soaring food and fuel bills.

“May’s result is one point lower than the previous record set in July 2008 when the headline score plunged to -39. This means consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy, or the Covid shutdown.”

He added: “Consumer pessimism is most evident in depressed sub-measures on the general economy at -63 for the past year and -56 for the coming year. The Major Purchase Index has decreased for each of the past six months and is now at -35, reflecting the latest dismal set of retail sales figures.

“Even the Bank of England is pessimistic, with Governor Andrew Bailey this week offering no hope of tackling inflation. The outlook for consumer confidence is gloomy, and nothing on the economic horizon shows a reason for optimism any time soon.”

Linda Ellett, UK lead of Consumer Markets, Retail and Leisure at KPMG, said: “As prices and rates rise, the ability of consumers to spend is falling. Outgoings are being scrutinised, with some spend being curbed or canned.

“Consumers are increasingly searching out lower prices and offers. But retailers, faced with their own rising inflationary pressures, will find it harder to provide them.

“The cost of living squeeze is of course feeling tighter for some consumers than others. Amongst those we’ve surveyed: one third of consumers that started 2022 with savings are dipping into them to help meet their monthly essential costs. But two-thirds of consumers with savings still plan to spend some on the things that they want in 2022. It’s looking vital for the high street that in the coming months this group remain willing and able to spend.”