UK consumer confidence suffers fresh drop

British consumer confidence fell in January after improving in the last quarter of 2022, as inflation and high energy bills continued to erode household incomes, new data show.

GfK’s monthly consumer confidence index, a measure of how people view their personal finances and wider economic prospects, slipped to minus 45 this month, three points down on December.

“One thing we can be sure of is that 2023 promises to be a bumpy ride,” said Joe Staton, client strategy director at GfK.

With rising prices “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”, he said.

Inflation eased marginally to 10.5 per cent in December, down from a 41-year high of 11.1 per cent in October, according to the Office for National Statistics. But underlying price pressures remained high while food inflation stood at 16.9 per cent, the fastest pace since records began in 1977.

Levels of confidence had been steadily rising after sentiment dropped to a record low of minus 49 in September 2022.

International energy prices jumped after Russia’s invasion of Ukraine in February 2022, accelerating the rate of UK inflation. Living costs continued to rise this winter, leaving many with little to spare after paying food and household bills.

Britons were pessimistic about the economic outlook this coming year, the data showed, with the index standing at minus 54, 22 points lower than last January.

However, Stanton noted that a small rise in people’s confidence in their personal finances offered “a glimmer of hope”, although levels were down on the same month last year.

The index for major purchases registered the largest monthly decline, down to minus 40 in January, six points below the previous month.

This data comes as the quarterly Credit Conditions Survey, released by the Bank of England on Thursday, showed that demand for mortgages fell at the fastest rate on record in the final quarter of 2022, excluding the second quarter of 2020, when the Covid-19 pandemic forced the housing market to temporarily close.