Consumer confidence enjoys meagre boost following mini-budget

The GfK Consumer Confidence Index for October found shoppers were initially encouraged by the mini-budget announcement, which included support for winter fuel bills and tax cuts, before the fallout of the plans sparked economic turmoil.

The overall score increased two points to -47, compared to -49 in September and -44 in August. Sentiment over the general economic situation also edged up, with a seven-point increase in confidence that the situation would improve in the next year, compared to the month prior.

Consumers’ confidence in their personal financial situation for the coming year increased six points to -34, which was 35 points lower than this time last year. 

GfK client strategy director Joe Staton told Retail Week the slight increase on the barometer was “encouraging” but warned shopper sentiment is still at a historic low and the timing of the survey is likely to be a snapshot of the nation’s optimism upon the announcement of the mini-budget, but before Kwarteng resigned on October 14. 

“This was before the real details emerged that the tax cuts were unlikely to serve anyone in the middle and that only the rich would get richer,” said Staton. 

Almost all of the tax cuts in the mini-budget have now been scrapped and prime minister Liz Truss has resigned.

Major purchase index 

The index does still show increased wariness, as the major purchase index, which measures consumers’ willingness to buy big-ticket items like electrical appliances and furniture, dropped three points, a 31-point difference compared to last year. 

Staton said: “UK consumer confidence continued to bump along close to last month’s historic low, with an overall index score of -47 in October. However, all core measures remain severely depressed. The three-point fall in the major purchase measure continues a steep downward trend that began in July 2021 and is especially worrying for the final quarter of the year, which many businesses rely on to strengthen their balance sheets. 

“But the biggest danger by far is inflation, now rising at its fastest rate for 40 years. Households are not just running scared of burgeoning energy and food prices, and the prospect of further base rate rises increasing mortgage costs. They are now facing the likelihood of tax rises and even austerity measures. For ordinary consumers, this web of uncertainty and turmoil amounts to a ‘new abnormal’.

“The negative environment will deflate future spending plans, and cautious consumers could easily slow the UK economy still further. Consumers, like governments, are just as capable of U-turns, and today’s economic headwinds indicate a long hard winter.”