UK consumer mood slides back to near 50-year low – GfK

LONDON – British consumer sentiment fell for the first time in three months in January, returning near to historic lows as concerns about the economy and the soaring cost of living tightened the squeeze on household finances, research showed on Friday.

Market research firm GfK said its measure of confidence declined 3 points to -45, the third lowest reading since records started in 1974. A Reuters poll of economists forecast a rise to -40 from December’s -42.

The GfK index, which is not seasonally adjusted, usually rises in January.

Sentiment towards major purchases declined especially sharply this month.

The survey results highlight the impact that rising prices and economic uncertainty is having on UK households, with more consumers reporting a deterioration in their personal finances.

Energy bills and food prices in have escalated rapidly in recent months, eating away at households’ disposable incomes.

Food prices jumped 16.8 percent year-on-year in December – the sharpest increase since September 1977, according to the Office for National Statistics.

The cost of an average household energy bill in Britain is set to rise to 3,000 pounds ($3,697.50) a year from April.

Finance minister Jeremy Hunt and Prime Minister Rishi Sunak scaled back a two-year energy support scheme for households, which would have kept annual bills at 2,500 pounds, that had been promised by the previous leader Liz Truss.

“With inflation continuing to swallow up pay rises, and the prospect of some shocking energy bills landing soon, the forecast for consumer confidence this year is not looking good,” Joe Staton, GfK’s client strategy director, said.

A six point fall in the sub-index of consumers’ willingness to make expensive purchases showed how caution could slow Britain’s economy as the risk of recession lingers.

While British inflation eased last month after hitting a 41-year high in October, financial markets expect the Bank of England to raise its key interest rate to 4 percent in February from 3.5 percent. The central bank hiked rates at its last 9 meetings in an attempt to bring double-digit inflation back to its 2 percent target.

The survey of 2,000 people was conducted between Jan. 3 and Jan. 12.

($1 = 0.8114 pounds)