U.K. Consumers Turn Notably Gloomier, Survey Says
Inflation has trended close to its 2% target in recent months, but is set to turn higher toward the end of the year
Consumers in the U.K. have become significantly more pessimistic this month, pointing to weaker personal finances and economic activity, with borrowing costs set to stay high after the Bank of England chose to hold interest rates.
Research group GfK’s measure of consumer confidence tumbled to minus 20 in September, well down on the minus 13 of July and August. Key future indicators on personal finances, the economy and purchase intentions all turned sharply lower, GfK said Friday.
The reading, which takes confidence back to the level at the start of this year, also was worse than economists expectations, also of minus 13, according to a Wall Street Journal poll.
The weaker sentiment might prove a headache for the recently elected Labour government, which has put growth at the top of its political agenda.
The government’s policy relies on strong consumer confidence as it underpins economic growth and is a significant driver of shoppers’ willingness to spend, Neil Bellamy, consumer insights director at GfK, said.
“Despite stable inflation and the prospect of further cuts in the [Bank of England’s] base interest rate, this is not encouraging news for the U.K.’s new government,” he said.
The BOE held its key rate on Thursday, and signaled that it was willing to only gradually reduce the dial on borrowing costs. That pushes back the chance to sooner boost economic activity, after the economy only stagnated in June and July this year.
Inflation has trended close to its 2% target in recent months, but is set to turn higher toward the end of the year as energy bills rise and services-sector inflation remains sticky.
Official retail sales data for August, which are especially influenced by consumer confidence, will be published at 0600 GMT on Friday.