Consumer confidence drops in July as ‘reality bites’

Consumer confidence has taken a nosedive as the harsh reality of relentless inflation and rising interest rates sets in, according to a survey. The Consumer Confidence Index by GfK plummeted by six points in July, reaching a low of minus 30.

Concerns about personal finances and the overall state of the UK economy over the next year also dropped, with decreases of six and eight points respectively. Despite this decline, the outlook for personal finances in the next 12 months remains 19 points higher compared to the same time last year.

Additionally, expectations for the general economy are still 24 points better than they were in July of the previous year. The major purchase index, which serves as an indicator of confidence in buying big-ticket items, fell by seven points to minus 32. Consumers have scaled back their spending in order to make ends meet.

Joe Staton, the client strategy director at GfK, commented on the situation, stating: “For the first six months of 2023, UK consumer confidence improved despite the headwinds of the cost-of-living crisis, with double-digit inflation outpacing income growth and rising interest rates impacting both homeowners and renters alike.

"Suddenly, this resilience has collapsed, resulting in a six-point fall this month in the headline score. The recent fall in headline inflation will do little to improve the financial mood; consumers need to see falling prices and interest rates before that happens. All in all, it’s bad news. People are feeling economic pain and this confidence deficit needs to be reversed before the gains this year are lost.”

Linda Ellett, the UK head of retail and leisure consumer markets at KPMG, also expressed her concerns. She said: “Over half of consumers