Spenders tighten belts as consumer confidence drops to near-record low

Shoppers have sworn off making big purchases amid soaring food inflation and fears of another jump in energy bills.

Consumer confidence has slumped to a near-record low of minus 45 on market research firm GfK’s long-running index. And confidence in the general economy for the coming year is a miserable minus 54, down 22 points on last January.

‘Consumers have a New Year hangover but it’s of the economic kind, with high levels of pessimism over the state of the wider economy,’ said GfK’s Joe Staton.

‘And unlike a conventional hangover, this one won’t vanish quickly.’

People’s confidence about personal finances is at minus 27 on the index – better than in December but still 25 points lower than this time last year.

The major purchase index, a measure of confidence in buying big-ticket items, is down six points to minus 40 – some 30 points lower than a year ago.

Pessimism has set in despite the rate of inflation dipping for a second month to 10.5 per cent.

While the fall suggests the peak of the cost of living crisis is past, it offers little relief for households and companies still facing eye-watering prices.

Food price inflation hit yet another 45-year high of 16.8 per cent last month, while government help with energy costs will be scaled back from April, capping average household gas and electricity bills at £3,000 a year, up from £2,500.

‘Higher essential costs and a fear of further increases yet to come are weighing on consumer confidence, whilst increased spending on credit at Christmas is also weighing on many minds,’ said Linda Ellett, of KPMG.

‘There are still consumers planning on spending this year on the likes of holidays, home improvements and appliances. The economy will certainly need that spend.’

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