UK consumer confidence plunges to lowest since 1974
Consumer confidence in the UK has dipped to the lowest level since records began in 1974 amid growing concern over the cost of living crisis.
The latest snapshot from GfK shows consumers are now gloomier about their personal finances and the wider economic outlook than they were during the financial crash in 2008 amid fears Britain is headed for a recession.
The consumer confidence number fell two percentage points to a record low of -40 in May, beating the previous record set during the financial crisis.
Analysts said the survey is a sign that the worst inflation in four decades is threatening the recovery from the pandemic as the UK high street faces a tough summer as the cost of living crisis bites.
Read more: UK inflation hits 40-year high of 9% as cost of living squeeze intensifies
UK inflation hit its highest level in 40-years as consumer prices soared 9% in April driven by a 54% surge in energy bills and higher fuel and food costs exacerbated by Russia's invasion of Ukraine.
"Consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy, or the COVID shutdown," said Joe Staton, client strategy director at GfK.
Helen Dickinson, CEO of the British Retail Consortium, said stores are facing pressure from the squeeze on family finances as well as their own suppliers.
"The fall in demand comes as consumers reign in their discretionary spending following a significant reduction to real incomes for households across the UK.
"Meanwhile, retailers face higher food and commodity prices, increased shipping and transport costs, and the tightest labour market in decades.
Read more: Is the UK heading into a recession?
"Until inflation is brought to heel, and consumer confidence returns, retailers could be in for some difficult times ahead, with lower demand and reduced margins."
The index measuring changes in personal finances over the last 12 months decreased three points to -22, this is 18 points worse compared to May 2021.
"As prices and rates rise, the ability of consumers to spend is falling," said Linda Ellett, head of consumer markets, retail and leisure at the consulting firm KPMG. "Outgoings are being scrutinised."
GfK's figures mount further pressure on chancellor Rishi Sunak to help suffering households, and also push the Bank of England to take a more dovish stance when lifting interest rates.
Earlier this week, the chancellor said that extra government spending to help consumers handle rising bills risks further stoking inflation, warning that hard times are coming for Britain's economy.
"We need to be careful," Sunak said speaking to business leaders at the annual dinner of the Confederation of British Industry on Wednesday evening. "At a time of severe supply restrictions, an unconstrained fiscal stimulus does risk making the problem worse."
Read more: UK economic growth falls in April as inflation hits demand
It came as retail sales unexpectedly jumped by 1.4% in April from a 1.2% drop the month before, beating economist forecasts of a 0.2% decline. This was despite inflation soaring 9% during the month.
The recovery was driven by a 2.8% surge in food store sales volumes, according to the Office for National Statistics (ONS).
However, ONS deputy director for surveys and economic indicators Heather Bovill said the "figures still show a continued longer-term downward trend" as overall sales fell 0.3% over the three months to April.