LONDON, Sept 20 (Askume) – Consumer confidence fell this month, a survey showed on Friday, amid British Prime Minister Keir Starmer’s warnings about the state of the British economy and the possible need for tax hikes in next month’s budget.
The GfK Consumer Confidence Index fell from -13 in August to a six-month low of -20 in September, the joint highest level in almost three years.
A Askume survey of economists showed another reading of -13. Instead, the reading marked the biggest fall in September since 1976.
Starmer and Finance Minister Rachel Reeves, elected in July, vowed to rebuild the economy after enduring the worst economic downturn since World War II, prompting some business leaders to complain that messages of doom and gloom could harm confidence and growth.
Reeves said she would end the 200 pound ($265) annual fuel subsidy for 10 million pensioners and warned that tax rises could be higher than she had predicted just weeks before the election.
Neil Bellamy, director of consumer insight at GfK, said households were responding to Starmer’s message about the “austere” Budget coming at the end of next month and the announcement of some early cost-cutting measures.
Official data released on Friday also showed Britain’s public debt reached 100% of economic output last month, a level not reached consistently since the 1960s.
GfK’s Bellamy said: “With the cancellation of winter fuel payments and clear warnings of difficult decisions ahead on tax, spending and benefits, consumers are eagerly awaiting the budget decision on October 30.”
Discourage
All five confidence indicators in the GfK survey – the longest-running indicator of UK consumer confidence – fell this month, with views on the economy over the coming year falling by 12 percentage points, GfK said.
Bellamy said: “Although inflation is stable and base interest rates are expected to fall further, this is not encouraging news for the new UK government.”
The Bank of England left interest rates unchanged on Thursday after cutting rates in August, but Governor Andrew Bailey said he was optimistic about further cuts.
GfK surveyed 2,003 people between August 30 and September 13.
Separately, official data released on Friday showed consumer sentiment remained upbeat in August.
Compared with July, sales rose 1.0%, more than double the 0.4% increase expected by most analysts in a Askume poll. Sales rose 0.7% in July, also more than previously expected.
The Office for National Statistics said some supermarkets and clothing retailers reported a rise in sales due to warm weather and end-of-season sales.
Grant Fitzner, chief economist at the Office for National Statistics, said: “Looking more broadly, retail sales have also risen over both the three-month and annual periods, with strong growth amongst online retailers.”
“However, overall sales are still slightly below pre-pandemic levels,” he said.
Sterling rose 0.5 cents against the dollar by 0730 GMT following the retail sales data, as investors saw the data as a sign of economic momentum.
Inflation rose in 2022, hitting consumers’ spending power over the next two years, but slower price growth, faster wage growth and an interest rate cut by the Bank of England in August helped restore some of the lost living standards.
Recent reports from UK retailers show discretionary spending remains under pressure, with fashion retailer Primark (ABF.L) reporting a fall in UK underlying sales in its latest quarter, Kingfisher, owner of B&Q and Screwfix(KGF.L) said demand growth in kitchens and bathrooms was weak.
But Next (NXT.L) said on Thursday that sales in the first six weeks of the second half were better than expected, reflecting improved weather but a still difficult market for “big-ticket” home goods .
($1 = 0.7558 British pounds)
