Consumer confidence falls amid inflation, fuel bills and interest rate rise fear

Consumer confidence fell significantly in January as Britons braced themselves for surging inflation, rising fuel bills and the prospect of interest rate rises.

GfK’s long-running Consumer Confidence Index dropped four points to minus 19 as shoppers indicated they are preparing to tighten their belts in the face of a cost of living crisis.

Confidence in the general economic situation took the deepest plunge of eight points, both in terms of the last 12 months and expectations for the coming year, to minus 47 and minus 32 respectively.

Confidence in consumers’ personal financial situation for the coming year fell three points to minus two, four points lower than this time last year.

The Major Purchase Index, an indication of confidence in buying big ticket items, fell by four points to minus 10 in January, although this is still 14 points higher than it was last January.

GfK client strategy director Joe Staton said: “The UK’s financial pulse weakened further this January driven by concerns over personal finances and the general economic situation.

“All five measures are down in January and the picture on the economy is especially bad with an eight-point decrease in how we see the past year and the year to come.

“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.

The four-point fall in the major purchase index certainly suggests people are ready to tighten their belts.

“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.”

The survey comes as Britain’s rate of inflation rocketed to its highest level for nearly 30 years as the cost-of-living squeeze intensifies.

The Office for National Statistics (ONS) reported on Wednesday that the Consumer Prices Index (CPI) inflation jumped from 5.1% in November to 5.4% in December, the highest since March 1992, when it stood at 7.1%.