Market research firm GfK said on Friday its consumer confidence index fell to -38 from -31 in March, within a whisker of an all-time low hit in July 2008, in the midst of the global financial crisis.
Only one economist had forecast such a drop in a Reuters poll that had pointed to a reading of -33. Stretches of readings of -30 and below have presaged recession on four out of five occasions since the survey started in 1974.
(GRAPHIC-UK consumer confidence nears all-time low in April: GfK, https://fingfx.thomsonreuters.com/gfx/polling/lgpdwgkbevo/Pasted%20image%201650549064224.png)
With consumer price inflation surging to a new 30-year high of 7% in March and likely to rise further, GfK’s gauge of confidence in the future health of financial confidence slumped to a level never seen before.
The survey underscored growing concern among some Bank of England officials about weakening demand in the economy, even though inflation is far above its 2% target.
GfK reported a sharp decrease in consumers’ intentions to make major purchases. A separate survey from accountants KPMG showed around a third of consumers had cut back on spending this year.
“This is dire news for consumer confidence and with little prospect of any economic relief on the horizon we can only forecast further falls in the index for the year ahead,” Joe Staton, client strategy director at GfK, said.
Last month Britain’s government watchdog said consumer price inflation rate was heading for 9% later this year, as it predicted living standards in 2022 would fall by the most since at least the 1950s.
The BoE has raised its benchmark Bank Rate three times since December and financial markets expect it to increase it again to 1.0% in May, even as the economy heads into a slowdown.
The survey’s gauge of confidence in the economy fell to within a point of the record low struck in April 2020, when the first COVID-19 lockdown brought much of Britain’s economy to sudden halt.
A closely watched business survey from S&P Global, due at 0830 GMT, will provide more clues on whether the collapse in consumer confidence is starting to hurt business activity.
Last week Tesco, Britain’s biggest retailer, warned of a drop in profits this financial year as surging inflation piles pressure on the supermarket group and its customers alike.
(Reporting by Andy Bruce; editing by David Milliken)