Pessimism weighing on Britain’s households has hit unprecedented levels as the cost-of-living crisis pushed confidence in the economic outlook to its joint lowest, a survey showed.
Market research firm GfK said consumer morale gauge, dating back to 1974, touched an all-time low of -40 in May from -38 in April. Economists polled by Reuters had expected -39.
Past readings this low have presaged recessions and Friday’s survey will further pressure finance minister Rishi Sunak to give more help urgently to households facing the highest rates of inflation since the early 1980s.
GfK’s gauge of economic optimism for the coming 12 months matched a record low hit in April 2020 as the coronavirus pandemic swept the country.
While business surveys and jobs data show a healthier picture – one reason why the Bank of England has raised interest rates – this was also the case in 2008 when a severe downturn followed as the global financial crisis unfolded.
“Consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy, or the Covid shutdown,” said Joe Staton, client strategy director at GfK.
Even recessions in the early 1980s and early 1990s – a time of double-digit interest rates and high unemployment – produced less pessimism than the current crisis which is playing out against the backdrop of the war in Ukraine.
Britain’s budget forecasters have said households face the biggest cost-of-living squeeze since records began in the 1950s.
A Reuters analysis of international consumer confidence data suggested government action now might be warranted.
British consumers are gloomier than their French or German counterparts have ever been in records that stretch back to 1985, applying GfK’s methodology to comparable European Commission surveys.
Britain has the highest inflation of Europe’s big economies and in the Group of Seven.
Separate data published by Lloyds Bank showed spending on energy by its customers rose by an annual 28% in April.
The BoE forecasts inflation will top 10% later this year and investors expect more interest rate increases.
“Nothing on the economic horizon shows a reason for optimism any time soon,” Staton said.