Consumer confidence shows no improvement as it drops to near-historic lows

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UK consumer confidence dropped again in January and showed little signs of improvement as it reached near-historic lows.

The GfK consumer confidence index decreased three points to -45 in January compared with December as four measures were down and one increased.

The index is at its lowest level since October, when it was -47, and the outlook for the next few months looks bleak due to inflation and the cost-of-living crisis.

Consumer confidence in personal finances over the past 12 months dropped three points to -31, though consumers’ forecast of their financial situation over the next 12 months had improved by two points to -27.

The general economic situation remains unpromising as consumer confidence fell five points to -71 and expectations over the next 12 months also fell by one point to -54.

The major purchase index was down six points to -40 and the savings index also fell six points to 14.

GfK client strategy director Joe Staton said: “After a short-lived and weak rally in Q4 last year, UK consumer confidence has slipped to -45 in January. Consumers have a new year hangover, but it’s of the economic kind, with high levels of pessimism over the state of the wider economy.

“Unlike a conventional hangover, this one won’t vanish quickly. The only glimmer of hope in the results is a slight uptick in the outlook for our personal financial situation, but this is of little comfort because it is still 25 points lower than this time last year.

“This month’s six-point decline in the major purchase index does not augur well because consumer spending is a driving force of our economy and future growth.

“With inflation continuing to swallow up pay rises and the prospect of some shocking energy bills landing soon, the forecast for consumer confidence this year is not looking good. One thing we can be sure of is that 2023 promises to be a bumpy ride.”