Concerns about the UK economy’s future have led to a dip in consumer confidence for the first time in six months.
- GfK’s economic optimism index dropped by four points to -15, reflecting apprehension about the economic outlook over the next year.
- Despite these concerns, there is new optimism about personal finances, supported by reduced mortgage rates.
- The savings index has increased, suggesting a consumer preference for saving over spending amid uncertainty.
- Overall confidence remains higher compared to previous years, despite the current decline.
Concerns about the future of the UK economy have stirred anxiety among consumers, causing a dip in household confidence after half a year of growth. The long-running index, dating back to the 1970s, recorded a stagnation at -13. This figure remains slightly above its long-term average of -18 but fell short of the expectations set by City analysts.
GfK’s economic optimism index declined by four points, now standing at -15, which is its first drop since February. This downturn mirrors widespread apprehension about the nation’s economic trajectory over the forthcoming year, with households expressing less confidence about the economy’s performance in the past twelve months, a period marred by recession.
Despite prevailing concerns, sentiments regarding personal finances have shown notable improvement. The GfK budget index rose by three points, reaching +6, bolstered by a recent reduction in mortgage interest rates. The Bank of England’s decision to cut the base rate from 5.25% to 5% on August 1 provided significant relief to borrowers, with further rate cuts anticipated throughout the year.
Additionally, the savings index observed a substantial rise, climbing six points to 33. This trend indicates a shift among consumers, who are opting to save rather than spend, leveraging higher interest rates amid economic uncertainty.
While consumer confidence has rebounded from its record low of -49 in September 2022 following the controversial mini-budget of Liz Truss and Kwasi Kwarteng, the overall economic outlook remains precarious. GfK’s client strategy director, Joe Staton, highlighted that despite mixed results, confidence figures are considerably more positive than a year or two ago.
The UK consumer confidence dip underscores the ongoing precariousness of the economic outlook, despite some financial optimism.
