Unlock Editor’s Digest free
Roula Khalaf, editor -in -chief of the FT, selects her favorite stories in this weekly newsletter.
British consumer confidence has dropped sharply in January to reach its lowest level for more than a year, the increase in costs of public loans and warnings in job cuts that have weighed on economic trust.
The Consumer Confidence Index GFK – A measure of the way people perceive their larger personal finances and economic perspectives – has dropped by 5 points at least 22, the lowest figure since the end of 2023, according to new data .
Consumer confidence provides a prospective measure of household expenditure: a darker feeling means that people are more likely to save than making significant purchases. Households constituted substantial savings last year, limiting the resumption of expenses, despite growth in wages greater than inflation throughout 2024.
The monthly drop in the GFK consumer confidence index has been the largest since September 2024, when consumers were concerned about the possible tax increases in the October budget.
Neil Bellamy, director of consumer studies at NIQ GFK, noted a particularly sharp drop in confidence in the British economy as a whole. “These figures point out that consumers lose confidence in the economic perspectives of the United Kingdom,” he said.
The investigation was carried out during the first half of January, when the loan cost of the United Kingdom at 10 years has reached its highest level since the financial crisis, threatening the government’s ability to respect its budgetary rules and Increasing the risk of new tax increases.
Borrowing costs have since reduced following a surprise drop in British inflation in December, but remain higher than in the fall.
Surveys of companies in early January also highlighted reduced hiring forecasts, partly due to the next increase in employer social security contributions, which should come into force in April.
Confidence was below the forecasts of less than 18 of the economists interviewed by Reuters, but in accordance with the expectations of Ellie Henderson, economist at the Investc investment bank.
Henderson said that the news of the increase in borrowing costs and potential job losses “may well have harmful consequences on perceptions and expectations concerning the economy and finance of households”.
Consumers are “increasingly worried about job prospects,” said Tomasz Wieladek, European chief economist of the T Rowe Price investment company.
The GFK savings index, which is not included in the calculation of the overall confidence index, jumped 9 points to more than 30. Bellamy qualified this increase in “unwelcome” because it signals that households are Prepare for a difficult economic period by favoring savings on expenses.
The savings rate of British households, the proportion of disposable income which is not spent, was 10.1 % in the three months preceding September, well above the average of 5.5 of the period 2016 -2019, according to official statistics. Despite the increase in real wages for more than a year and a half, the consumption of households per capita remained 2.2 percent lower than its levels of the fourth quarter of 2019, before the pandemic.
But Henderson argued that when confidence is recovered, two -digit savings rates and healthy wage growth could straighten consumption.
“If confidence should resume, consumers as a whole would have the means to trigger a higher level of consumption,” said Henderson. “This confidence will be recovered soon, but it is less certain,” she added.
The affordability of the accommodation has improved, according to separate data published Friday by Nationwide. He showed that while remaining higher than the long-term average, the Primo-Accédants’ course/benefit ratio fell to 5 at the end of last year, after a summit of 5.8 in 2022. In the same way, The mortgage reimbursements of first-time buyers fell to 36. percent of their net salary, against a summit of 38 percent at the end of 2023.
