British household confidence deteriorated again in June, setting a record low for the second consecutive month and adding to fears of a decline in consumer spending amid sluggish economic growth.
The consumer confidence barometer compiled by research firm GfK fell to minus 41 in June from minus 40 in May, the lowest level since the survey began in 1974, missing economists’ expectations of a slight increase to minus 38.
The index has fallen continuously for seven consecutive months due to rising inflation, bringing consumer confidence back to levels that in the past corresponded to economic recessions.
“Consumer sentiment is currently gloomier than at the onset of the Covid-19 pandemic, the Brexit referendum result of 2016 and even the shock of the global financial crisis of 2008, and now there is talk of a recession looming,” GfK client chief strategy officer Joe Staton said.
Four of the five measures that make up the confidence index fell in June from the previous month, with the biggest drop in consumers’ near-term outlook for their personal finances.
“With prices rising faster than wages, and the prospect of strikes and runaway inflation provoking a summer of discontent, many will be surprised the index hasn’t fallen yet,” Staton said.
UK annual inflation hit a four-decade high of 9.1% in May amid rising food and energy prices, the highest rate among wealthy Group of Seven economies Gross domestic product contracted in March and April, adding to the likelihood of the UK falling into recession this year.
Households’ growing pessimism about the state of the economy and their finances could weigh on activity if they start to cut spending. “Britain is facing a new economic reality and history shows that consumers will not hesitate to entrench and tighten their purse strings when the going gets tough,” Staton said.
However, UK household consumption has shown resilience in recent months despite the cost of living crisis, as a strong labor market and significant savings from the pandemic have continued to support incomes.
“While consumer spending could fall in the coming quarters, a very large and prolonged slump in spending is not necessarily expected,” Capital Economics deputy economist Nicholas Farr said in a note ahead of the data release. .
The GfK survey, which interviewed around 2,000 people, was carried out between June 1 and June 14.