UK consumer confidence has plunged to its lowest level since records began in 1974, according to GfK's Consumer Confidence index. The survey reveals a 'sense of exasperation' about the economy, driven by the soaring cost of living and bleak economic prospects. The index fell sharply in August as inflation hit 10.1% in July, the fastest pace in 40 years, and the UK is expected to enter a recession later this year.
Retail sales volumes dropped by 1.2% in the three months to July, with consumers cutting back on non-essential spending, particularly clothing and household goods. The Office for National Statistics (ONS) reported that feedback from retailers indicated consumers were reducing spending due to 'increased prices and affordability concerns'. Fuel sales also declined in July as people cut down on travel, deterred by high petrol and diesel prices.
Rachel Barber, legal partner and retail specialist at Deloitte, noted that many people are postponing major purchases such as electricals and furniture. 'Consumer confidence in the state of the economy has plummeted,' she said, adding that one in three consumers are now buying their main food shop at discounters, up from 28% a year ago.
Clothing retailer Joules issued a profits warning after trading 'softened materially' in the five weeks to 14 August. The company cited extremely warm weather hitting sales of outerwear and wellies, compounded by 'the well-documented cost-of-living crisis'. Joules confirmed it is in talks with rival Next about a potential £15m stake, but cautioned that no agreement is certain.
The Bank of England expects the UK economy to fall into recession later this year, with the downturn forecast to last 15 months. Inflation is predicted to soar above 13% when the energy price cap rises in October, further squeezing household finances.
