Consumer confidence in the UK has taken a hit ahead of the upcoming Budget, with the latest poll showing a significant drop in optimism regarding personal finances, purchase intentions, and the state of the economy. The index, published by GfK, has fallen to -20 this month, the lowest reading since March. This decline comes amidst warnings of tax rises in the Budget to address the public finances, following the controversial decision to means-test winter fuel payments for pensioners. Neil Bellamy, from GfK, highlights a notable drop in forward-looking indicators, signaling concerns about the future economic outlook. Consumer confidence is crucial for economic growth, as it influences consumer spending habits.
The drop in consumer confidence has already impacted retailers, with reports of weak demand for big-ticket items like kitchens and bathrooms. The anticipation of a ‘painful’ Budget by Rachel Reeves on October 30th is causing anxiety among consumers, as tough decisions on tax, spending, and welfare are expected. The recent polling by GfK, conducted between August and September, captures the growing unease among consumers. Opposition leader Keir Starmer has also warned about tough decisions needed to address the financial challenges facing the UK.
Despite the drop in consumer confidence, retail sales in August rose by 1%, driven by promotions and warmer weather. However, Government borrowing has exceeded forecasts, with the national debt reaching 100% of GDP. The government, under pressure to address the growing fiscal challenges, is expected to make tough decisions in the upcoming Budget to stabilize the economy. Experts warn that consumer confidence is a critical indicator of economic health and a trigger for increased spending. The economy’s response to the Budget announcements on October 30th will determine the future trajectory of the UK’s economic recovery.
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