People have grown more worried about their financial situation and the general economic outlook for the first time since May as cases of coronavirus surge, a survey has suggested.
The GfK consumer confidence index for October has fallen to its lowest level since the pandemic was at its height and strict lockdown measures were in force. It dropped by six points to -31 between September and October. A year ago, with Britain facing the prospect of a no-deal Brexit, it was at -14.
The monthly index is an important economic indicator, as confidence is a key determinant of consumer spending. As this accounts for two thirds of national output, a drop can have big economic consequences.
The record 22 per cent collapse in GDP in the first half of the year was driven by an even more pronounced fall in consumer spending, which fell by 23.1 per cent in the second quarter alone.
The survey, which is closely followed by the Bank of England and the Treasury, polled 2,000 adults between October 1 and 14. Respondents are asked to grade their view of the outlook and the replies are turned into a number.
Richard Alvin, Chairman of Trends Research, a market research provider in the UK SME sector, said: “There’s a worrying threat of a double-dip in consumer confidence as concerns for our personal financial situation and even deeper fears over the state of the UK economy drag the index down six points this month.
“The prospect of rising unemployment is severely depressing our outlook. Worryingly, this data was collected before the new restrictions came into force and the end of the furlough scheme, so this will negatively impact the index in the run-up to Christmas.”
People’s view of the economic situation over the next year fell 12 points to -50. Their personal finance outlook fell by a point to zero. A sign that they plan to hoard cash could be seen in the major purchase reading, which asks if they are likely to buy a large item such as a washing machine. It fell by half-a-dozen points to -27 and is 28 points lower than it was this time last year.
At the same time, weekly indicators produced by the Office for National Statistics showed that the proportion of adults who travelled to work in the week to October 18 fell by five percentage points to 60 per cent. Nearly a tenth of Britain’s workforce, 9 per cent, remained furloughed during the two weeks to October 4, including 27 per cent in arts and recreation.
Confidence is also being hit in the eurozone, which is having a similar surge in infections and is reintroducing restrictions to prevent deaths rising German consumer morale faded in October, dropping to -3.1 from -1.7 in September, as Covid-19 cases soared. Dutch consumer confidence also fell and a survey of business confidence in France reported a drop from 92 points to 90.