U.K. consumer confidence fell in January to depths last seen during the early months of lockdown in 2021 as cost-of-living crisis took over from the pandemic as a prime concern.
GfK’s monthly consumer confidence index, which is closely followed by the Bank of England and the Treasury, dropped 4 points in January to minus 19, the lowest level since the country was in lockdown in February 2021.
“Despite some good news about the easing of Covid restrictions, consumers are clearly bracing themselves for surging inflation, rising fuel bills and the prospect of interest rate rises,” said Joe Staton, client strategy director at GfK.
Households are bracing for a big hit in April, when energy bills may rise by 50% and the new national insurance contribution kicks in. For the typical U.K. household on an annual income of 27,000 pounds ($24,000), the twin shock will cost about 1,200 pounds.
The drop in confidence was driven by concerns over personal finances and the general economic situation. People’s expectation of their own situation fell 3 points between December and January to minus 2. It was last lower in November 2020.
There was also a 4-point fall in the major-purchase index, which measures whether now is a good time to buy big ticket items. It is now at minus 10, which “suggests people are ready to tighten their belts,” Staton said.
“Will the mood brighten when the latest wave of the pandemic subsides and Covid numbers improve? It seems unlikely because it’s the cost-of-living squeeze that’s worrying us now, and this will affect us for months to come,” Staton said.
GfK surveyed 2,000 people between Jan. 4 and Jan. 12.
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