The latest consumer confidence barometer show Brits are growing increasingly fearful about their finances and the wider economy, with no end yet in sight.
The mood of UK consumers has been “exceptionally downcast” in August, with confidence declining to its lowest score on record as the cost of living continues to spiral.
Inflation jumped to a new high of 10.1% for the 12 months to July, up from 9.4% in June, according to figures released by the Office for National Statistics (ONS) this week. The Bank of England has said inflation could peak at more than 13%.
Meanwhile, the ONS reports the “real value” of pay has fallen by 3%, as average wages rose by just 4.7% between April and June.
No wonder then that the latest GfK Consumer Confidence Index reports an overall score of -44 in August, a three-point drop from July.
“The cost of living crisis has punched a gaping hole in consumer confidence, and with further uncertainty ahead of us as we go into the autumn the exceptionally downcast mood can only get worse,” GfK’s client strategy director Joe Staton tells Marketing Week.
All five measures which make up the headline index score have declined compared to last month.
Consumers’ perceptions of their own financial situation over the past 12 months fell two points to a score of -25, a 25-point drop compared to August last year. Expectations for the next 12 months are even worse, down five points since July to -31 and 42 points since last year.
People’s view of the general economic situation over the last year is down two points to -68, 26 points lower than August 2021. This measure has decreased month-on-month since December, eight months in a row.
Forecasts for the general economic situation over the coming year have suffered a three-point drop to a record score of -60, 54 points lower year-on-year.
The major purchase index, which indicates consumers’ likelihood to buy big ticket items, has decreased by four points to -38, and by 35 points since last August.
According to Staton, these figures present an “unprecedented challenge” for marketers. There are “no easy solutions” in sight to remedy consumers’ crashing confidence levels, and no indication yet of how long it will take until there is any significant change in how people feel.
“The findings that we are getting as each month passes tell a story of people not just ‘feeling the pinch’. They are feeling frightened – and the scariest chapters are still to come,” he says.
“It’s never been this bad and anybody engaged in marketing strategy and execution is dealing with an unprecedented challenge. Consumers will be switching to cheaper alternatives, changing their buying habits or buying frequency, or cutting out certain items altogether. Marketers absolutely must track this shifting environment if they are to stay on top.”
Data shared with Marketing Week by Kantar last week reveals 47% of consumers have made or are expecting to make cut backs in their general expenditure due to inflation this year.
However, shoppers are also keen to avoid any drastic alteration to their current lifestyles, and will absorb 75% of price increases in grocery or fashion rather than avoid the purchase altogether. During the UK’s last major recession in 2008, consumers chose not to buy less, but to buy cheaper products and make use of more promotions.
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