UK client confidence falls to file low in September

UK client confidence has defied expectations of an enchancment and fallen to a brand new all-time low, as households wrestle below the stress of the price of residing disaster.

The patron confidence index, a carefully watched measure of how individuals view their private funds and wider financial prospects, dropped 5 share factors to minus 49 in September, analysis group GfK mentioned on Friday. That was the bottom since data started in 1974.

Joe Staton, GfK shopper technique director, mentioned confidence had “tumbled” in September to a brand new low as households “buckl[ed] below the stress of the UK’s rising price of residing disaster pushed by quickly rising meals costs, home gas payments and mortgage funds”.

The autumn defied expectations of a small rise to minus 42 forecast by economists polled by Reuters, who thought there could be some enchancment following the authorities’s £150bn package deal aimed toward freezing family vitality payments.

Line chart of Index showing UK consumer confidence fell to a record low in September

The information come the day after the Financial institution of England lifted rates of interest by 50 foundation factors to 2.25 per cent, the best since 2008, that means borrowing will turn out to be costlier for companies and households.

“For customers already struggling to maintain their family funds in examine, the elevated price of borrowing because of the speed rise . . . might signify the breaking level, resulting in the acceleration of lower in demand,” mentioned James Brown, managing associate at world consultancy Simon-Kucher & Companions.

Incorporating the vitality payments freeze, the BoE expects UK inflation to peak at 11 per cent in October from its present 9.9 per cent, a close to 40-year excessive, additional eroding households’ actual incomes.

The information additionally observe affirmation, forward of Friday’s mini-Price range, that the federal government will from November reverse the 1.25 per cent rise in nationwide insurance coverage contributions that was launched in April.

Staton mentioned the “mini-Price range, and the longer-term agenda to drive the economic system and assist rebalance family funds, shall be a significant check for the recognition of Liz Truss’s new authorities”.

The GfK index, primarily based on interviews collected within the first two weeks of the month, confirmed scores in relation to 4 of the 5 questions posed, which contact on private funds and the broader financial image, at file lows.

Ahead-looking indicators, which observe expectations for the subsequent 12 months, registered the biggest fall, dropping 9 share factors for private funds and eight share factors for the economic system.

Economists anticipate record-low client confidence to end in falling spending, a pattern registered by the BoE in its brokers survey printed on Thursday.

It confirmed that meals retailers reported prospects choosing cheaper items and reducing again on non-essential objects, akin to confectionery. Low cost chains gained market share, whereas gross sales of home items, akin to furnishings, electrical items and home-improvement merchandise, fell.

Clothes gross sales have been supported by the return to the workplace, however in hospitality, gross sales have been down on pre-pandemic ranges. Vacation reserving additionally weakened and home tourism was restricted by larger petrol costs.

Demand was robust, nevertheless, for monetary companies and authorized recommendation, akin to tax planning, fairness launch, debt consolidation and early reimbursement. Third sector organisations additionally reported a big rise in individuals in search of debt recommendation.