Autumn budget and inflation worries drag down consumer confidence
Consumer confidence slumped in September as concerns about the state of the UK economy and the possibility of higher taxes weighed on Brits’ minds.
Expectations of the state of the overall economy worsened to -36 in September, down from -32 in August, according to the British Retail Consortium.
Brits’ personal financial situations also slipped to -7 in September, down from -6 in August, while personal spending fell slightly to +14.
It’s the fourth consecutive deterioration in Brits’ economic confidence.
“Worries about the Budget, combined with the increase in the cost of living, have eroded confidence, with little sign that inflation will come down soon,” chief executive of the British Retail Consortium, Helen Dickinson, said.
Inflation in August remained at 3.8 per cent, driven by high food and services prices.
Core food price inflation was 5.1 per cent over the 12-month period, higher than the previous month. It was the fifth consecutive rise for the figure.
The reading has made it less likely that the Bank will cut interest rates: “At 3.8 per cent inflation is way above the Bank’s target and prices are expected to keep rising in the near term,” Danni Hewson, head of financial analysis at AJ Bell, said.
“Looking further down the track, markets are hedging their bets on the potential for one final interest rate cut in 2025 as labour market weakness begins to impact remuneration decisions.”
Millennial confidence craters
Confidence amongst millennials fell “dramatically” this month, Dickinson said.
Expectations for both the economy and their own finances fell by double digits, with the group cutting spending expectations for the months ahead.
Millennials, who are currently between 29 and 44 years old, are more likely to be directly affect by the unaffordability of property – mortgage rates have fallen much slower than anticipated at the start of the year, while Labour’s housebuilding plans have yet to filter through into market.
“All eyes are now firmly locked on the 26 November, and what the Chancellor will announce,” Dickinson said.