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Consumer confidence hits record low as prices soar

Updated: Nov 8, 2023


Due to the rising cost of living and gloomy economic outlook, consumer confidence in the UK reached a record low in August.

According to GfK's Consumer Confidence Index, the main factor contributing to the decline was a "feeling of annoyance" with the economy.

According to recent data, prices climbed at the fastest rate in 40 years in July, and the UK is on the verge of going into recession.

Retail sales volumes, meanwhile, decreased 1.2% in the three months leading up to July.

According to the Office for National Statistics (ONS), people are still reducing their non-essential spending, especially on apparel and household products.

Additionally, fuel sales fell in July as fewer people traveled as a result of rising gas and diesel prices as well as the recent hot weather.

After a tiny decline in June, sales volumes grew marginally (0.3%), but overall data indicates that sales have been declining since the summer of 2021.

The ONS said that overall retail sales were still higher than pre-Covid levels.

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The GfK consumer confidence barometer, which asks people about their views on the economy, reached its lowest point this month since records have been kept, which dates back to 1974.

Joe Staton, director of the client strategy at GfK, stated that the results "speak to a sense of capitulation, of financial events moving well beyond the control of regular people."

The burden on many people's personal finances in the UK is worrying, he continued, as headline after headline revealed that record inflation was reducing household purchasing power.

The British Retail Consortium's chief executive, Helen Dickinson, attributed the tepid increase in sales in July to the summer's warm weather but noted that most businesses would continue to experience declining volume despite rising inflation.

When the most recent energy price cap on family bills takes effect in October, inflation—which monitors the rate of price increases—is predicted to soar to more than 13%. Inflation hit 10.1% in July.

The UK economy is now anticipated to enter a 15-month recession later this year, according to the Bank of England.

Affordability issues

Because of declines in furniture and lighting stores, clothing store sales volumes fell by 1.2% in July while household goods store sales volumes fell by 0.4%.

According to the ONS, input from businesses revealed that consumers were limiting their purchases due to "increasing pricing and affordability concerns."

According to Deloitte's Rachel Barber, "Consumer confidence in the condition of the economy has deteriorated, so you're finding that one in five people are now delaying significant purchases like electricals and furniture, and you can see that in the numbers today, where they're down roughly 1.5%.

There are clear shifts taking place in the consumer's attitude regarding all of their purchasing,

The clothes and home goods company Joules, which has a rustic feel, is one business that has suffered from a decline in sales.

The company, which has its origins in equestrian and country music festivals, issued a profit warning on Friday.

The exceptionally warm and dry weather, which hurt sales of outerwear, rainwear, knitwear, and wellies, caused business to "soften considerably" in the five weeks leading up to August 14.

As a result, "the continued suppressed consumer demand due to the well-documented cost-of-living crisis" had been "compound[ed]."

At the same time, it declared that "good conversations" regarding Next, a competing retailer, purchasing a roughly £15 million interest in it, were still ongoing.

Joules cautioned that there is "no certainty that these conversations will result in any agreement," nevertheless.

The issue in the cost of living is being caused by rising gasoline, energy, and food prices. People's finances are being squeezed as a result of these hikes because earnings are not keeping up.

Prices for petroleum and energy had already been rising as countries began to recover from the coronavirus pandemic before to Russia's invasion of Ukraine, and the conflict has only increased those prices.

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