British household confidence in the economy has fallen for the first time in six months, according to the latest findings from GfK’s consumer confidence survey.
The long-term index, which dates back to the 1970s, was unchanged at -13, a figure slightly above the long-term average of -18 but below City analyst expectations.
This decline in optimism reflects growing concerns about the economic prospects for the coming year. The GfK economic optimism index fell by 4 points to -15, marking the first decline since February. Households are also less confident about the economy’s performance over the past twelve months, a period marked by a recession.
In contrast to the gloom surrounding the broader economy, households have become more positive about their personal finances for the year ahead. The GfK budget index rose by 3 points to +6, supported by a recent reduction in mortgage rates. The Bank of England’s decision on August 1 to cut the base rate from 5.25 percent to 5 percent, the first cut since March 2020, has provided some relief to borrowers, with further cuts expected to occur this year .
The survey also showed a significant increase in the savings index, which rose by 6 points to 33. This suggests that consumers are choosing to save rather than spend, taking advantage of higher interest rates during times of economic uncertainty.
While consumer confidence remains higher than in previous years – having recovered from a low of -49 in September 2022 – GfK’s director of customer strategy, Joe Staton, highlighted that the broader economic outlook remains precarious. He noted that despite the mixed results, overall confidence numbers are significantly more positive compared to a year or two ago.
The sharp drop in consumer confidence in September 2022 coincided with the aftermath of Liz Truss and Kwasi Kwarteng’s controversial mini-budget, which caused unrest in financial markets and caused mortgage rates to rise.