Consumer confidence slumps to lowest point in more than three years

Consumer confidence has slumped to its lowest point in more than three years amid inflation and rate hike fears, a survey suggests.

October saw a sharp deterioration in confidence, with 57% of households expecting a shift to higher interest rates and spending and saving becoming increasingly constrained, according to S&P Global figures.

The survey, collected monthly since 2009 and based on a panel of 1,500 UK households, slid for a third straight month to 41.3 – the lowest since July 2023.

Source: S&P Global

The drop was driven by a sharp decline in expectations for finances over the next 12 months, underpinned by intensifying inflationary pressures and households’ increasing expectations of higher Bank of England interest rates.

October, alongside April, marked only the second time in more than three years that households across all income brackets expected their financial wellbeing to deteriorate.

Households also reported increasing strain on their current finances this month, with private and public sector workers alike reporting a worsening in their current financial wellbeing – although the deterioration was greater among those employed in the public sector.

The major purchases index was also among its lowest in more than three years, suggesting that households remain highly reluctant to buy big-ticket items.

October also marked a fifth consecutive month of pessimism towards the labour market across UK households.

Maryam Baluch, economist at S&P Global Market Intelligence, said: “The slump in household confidence to its gloomiest in more than three years, a time when inflation was still close to multi decade highs, underscores the tough environment the Government faces with the upcoming Budget.

“Any ‘Burnham bounce’ has proved short-lived, eclipsed by the impact on the cost of living from events in the Middle East and the accompanying prospect of higher interest rates.

“October has brought a growing conviction among households that borrowing costs will rise imminently as the Bank of England seeks to tame inflation.

“As a result, Chancellor John Healey faces the challenge of setting a Budget that will not ruffle bond market feathers while seeking to keep alive the promise that the Government is serious about delivering stronger economic growth.”