UK consumer confidence hits record low, as people cut back on food shopping – business live

Feedback from supermarkets suggested customers were spending less on their food shop, because of the rising cost of living, says Heather Bovill, ONS deputy director for surveys and economic indicators.

Here’s her analysis of today’s retail sales report:

Clothes shops had a busier May, with clothing sales up 2.2% in the month.

But consumers cut back on household goods, where sales fell 2.3%, and department stores where volumes dropped 1.1%.

Automotive fuel sales volumes rose by 1.1% in May.

That may be due to an increase in hybrid working and a fall in those working exclusively from home, the ONS says.

Retail sales fall as consumers cut back on food

Retail sales fell in May as the rising cost of living hits household budgets, forcing people to cut back on food shopping.

Retail sales volumes across Great Britain fell by 0.5% in May from April, or by 0.7% if motor fuel is excluded, figures just released show.

The fall in sales volumes was driven by less spending at food stores, which fell by 1.6% month-on-month.

Reduced spending in food stores seems to be linked to the impact of rising food prices and the cost of living, the Office for National Statistics says.

But… shoppers had to spend more to get less. The value of retail sales rose by 0.2% month-on-month, and by 0.6% once you add in fuel (which hit record high prices).

UK retail sales to May
UK retail sales to May Photograph: Office for National Statistics

Inflation hit 9.1% in May, the highest in 40 years, which intensified the wage squeeze.

In the three months to May 2022, sales volumes fell by 1.3% when compared with the previous three months. This “continues the downward trend since summer 2021”, the ONS says.

Introduction: UK consumer confidence at record low

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

UK consumer confidence has fallen to its lowest level since records began nearly 50 years ago, as the cost of living crisis hits households, and a summer of strike action looms.

Research company GfK’s monthly survey of Consumer Confidence Index has hit a new record low this month, dropping one point to -41 in June.

UK consumer confidence report
UK consumer confidence report Photograph: GfK

There was a particularly sharp drop in people’s personal financial expectations, as inflation squeezed incomes.

Measures of changes in personal finances over the last year, and of general economic situation over the last year and the next year all dropped.

Joe Staton, Client Strategy Director, GfK says Britain faces a stark new economic reality, and people are reacting accordingly:

With prices rising faster than wages, and the prospect of strikes and spiralling inflation causing a summer of discontent, many will be surprised that the index has not dropped further. The consumer mood is currently darker than in the early stages of the Covid pandemic, the result of the 2016 Brexit referendum, and even the shock of the 2008 global financial crisis, and now there’s talk of a looming recession.

One thing is for sure, Britain faces a stark new economic reality and history shows that consumers will not hesitate to retrench and tighten their purse strings when the going gets tough.”

UK consumer confidence index
UK consumer confidence index Photograph: GfK

Britain’s bosses are gloomier too.

Flash estimates of the economy’s performance in June, released yesterday, showed business optimism at its lowest since the early months of the Covid pandemic in the spring of 2020 and the sharpest drop in new order volumes for a year.

Later today we’ll find out how optimism is holding up (or not) among German investors, and US consumers, as fears that major economies could be tipped into recession grow.

The agenda

  • 7am BST: UK retail sales for May
  • 9am BST: IFO index of German business confidence
  • 2.30pm BST: Bank of England chief economist Huw Pill gives a speech on ‘Inflation and Debt – Challenges for Monetary Policy after Covid-19’
  • 3pm BST: University of Michigan survey of US consumer sentiment
  • 3pm BST: US new home sales report for May


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