UK consumer confidence tumbles ahead of Healey’s budget, GfK reports

British consumer confidence has plummeted for the largest month-over-month decline since the onset of the COVID-19 pandemic, according to a survey that casts a bleak light on Finance Minister John Healey's upcoming budget. GfK's consumer confidence index fell by 11 points to -24 in October, marking its lowest level since April and falling short of all economists' expectations in a Reuters poll. The swiftest monthly decline since April 2020, which occurred just after Britain implemented its first lockdown due to the virus.

The decline was attributed to various factors, including surging inflation, the ongoing conflict in the Middle East, and the widespread strain on household budgets, rather than a single cause. No one factor appears to have driven the drastic drop. Healey has expressed a desire to provide households and businesses with some breathing room in his budget, presenting an optimistic outlook on the economy, citing the fastest growth in the first half of the year among the Group of Seven nations.

However, surveys from S&P Global and LSEG/Ipsos have also indicated a decline in consumer sentiment, reversing a recovery that began around the time Andy Burnham took office as prime minister.

Neil Bellamy, GfK's consumer insights director, expressed concern over the rapid deterioration of households' views on the broader economy and their willingness to make significant purchases. The major purchase index reached its lowest point in over two years, and consumers' expectations of inflation rose to their highest since April, reaching a peak almost three and a half years after their previous level.

This development is likely to worry the Bank of England, which is anticipated to increase interest rates later this month. GfK surveyed 2,003 adults between October 1 and October 14.