Consumer confidence has fallen in the face of higher energy bills and the threat of a Bank of England rate hike, a survey has revealed
The “Burnham bounce” has taken another hit, with a new survey showing households are increasingly worried about higher energy and borrowing costs.
Research by S&P Global showered consumer confidence edged down this month, in a setback for Prime Minister Andy Burnham and Chancellor John Healey going into next month’s Budget as wary households tend to spend less, further holding back the economy.
The findings come amid warnings of more pain for already cost of living weary households. Fuel prices have surged on the back of the ongoing Middle East war, which also threatens to trigger a surge in energy bills in the depth of winter.
The new government has been projecting a vision of “hope” to voters until now, with signs that the positively and a raft of early policy measures fed through to improving consumer and business sentiment over the summer.
However, S&P Global’s UK Consumer Sentiment Index survey ,based on feedback from 1,500 households, edged down to a three-month low of 42.7 in September, from 42.9 in August. “The reading was indicative of notable strain on financial confidence across UK households,” it said.
Households were more downbeat about their current finances and the outlook for the next 12 months, the survey found. That isn’t helped by the fact that workers are increasingly worried about the state of the labour market, with the overall level of job insecurity at the worst its been in almost four years.
Households are braced for the Bank of England to raise interest rates in the face of higher inflation. Some 53% of respondents now expect the Bank to do so, while only 12% foresee a further cut. People also tightened their purse strings further in September, with their willingness to spend dropping to a three-month low.
This month has also seen households continue to run down their savings at a rapid pace.
Maryam Baluch, economist at S&P Global Market Intelligence, said: “September data show a downbeat mood spreading across UK households as improved sentiment surrounding the new government is eroded by renewed worries over energy prices, the cost of living and job prospects.
“Worsening financial pressures, rising job insecurity and cautious spending behaviour continue to weigh on overall consumer sentiment. Job insecurity rose to its highest level in more than three-and-a-half years, highlighting a growing disconnect between rising economic growth and perceptions of employment security.
“At the same time, expectations that interest rates will begin to rise in the coming months have become more entrenched, adding to concerns about household finances.
“Against a backdrop of rising volatility in energy markets linked to tensions in the Middle East, households increasingly reported difficulties accessing credit, suggesting that expectations of tighter monetary conditions are beginning to feed through to borrowing conditions. Together, these factors point to cautiousness about both financial prospects and pose some downside risks to the broader economic outlook.”