Consumer confidence in the U.K. increased slightly in October, its first improvement in almost a year, but British households remain severely depressed amid high inflation and increasing economic and political uncertainty.
The consumer-confidence barometer compiled by research firm GfK rose to minus 47 in October from minus 49 in September, which marked the lowest confidence level since the survey began in 1974.
The reading came in above economists’ expectations, who expected the index to decline further to minus 50 in a poll by The Wall Street Journal.
October’s slight improvement in confidence comes after 10 months in which British consumer moods either deteriorated or stalled due to the impact of a cost-of-living-crisis that is squeezing household incomes.
Three of the five measures that form the barometer increased in October, while one was flat and one decreased compared with the previous month. However, all core measures remain severely depressed by historical standards, GfK client strategy director Joe Staton said.
Consumer expectations for the general economic situation and the personal financial situation over the next year improved, but the major purchase index–which gauges demand for big-ticket items–fell.
“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,” Staton said.
Households’ main concern continues to be inflation, which accelerated to 10.1% in September, its highest level in four decades. However, recent political and economic instability is also weighing on sentiment.
“[Households] 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,’” Staton said.
This negative environment is likely to deflate future spending plans, and cautious consumers could easily slow the U.K. economy further, he said. “Consumers, like governments, are just as capable of U-turns, and today’s economic headwinds indicate a long hard winter.”