Data: Confidence drops as consumers brace for rising inflation

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Concerns around the increase in fuel costs, as well as rising inflation and interest rates, led to a decrease in consumer confidence in January.

Consumer confidence fell by four points in January to -19, according to the latest GfK consumer confidence index.

As the cost of living looks set to increase, consumers expressed concerns about their personal finances over the next 12 months, with the index declining by three points to -2. This is now four points lower than January 2021 when the UK was in national lockdown.

Consumer sentiment towards the general economic situation over the past year dropped by eight points to -47. However, this is 20 points higher than in January 2021.

Economic expectations for the UK in the coming year also fell by eight points in January to -32, a figure that is 12 points higher than the same month last year.

The major purchase index also recorded a decrease of four points in January to reach -10, illustrating consumer hesitancy around large investments. Despite the drop, this figure remained 14 points higher than last January.

The saving index rose by one point to reach 15 in January.

Overall, the consumer confidence barometer recorded a 32% decline in January compared with the same month last year.

Young woman in a Manchester shopping centre wearing a face mask and looking at her smartphone

Consumer confidence dropped in January as concerns grew over the cost-of-living squeeze

GfK client strategy director Joe Staton said: “The UK’s financial pulse weakened further this January driven by concerns over personal finances and the general economic situation. All five measures are down in January and the picture on the economy is especially bad with an eight-point decrease in how we see the past year and the year to come.

“Despite some good news about the easing of Covid restrictions, consumers are clearly bracing themselves for surging inflation, rising fuel bills and the prospect of interest rate rises. The four-point fall in the major purchase index certainly suggests people are ready to tighten their belts.

“Will the mood brighten when the latest wave of the pandemic subsides and Covid numbers improve? It seems unlikely because it’s the cost-of-living squeeze that’s worrying us now and this will affect us for months to come.”