UK consumers became more pessimistic in January as the spread of the omicron variant of COVID-19 and high inflation weighed on households’ outlook for the economy and spending plans, according to a survey by research firm GfK.
“The UK’s financial pulse weakened further in January due to concerns about personal finances and the general economic situation,” said GfK’s director of client strategy Joe Staton.
All five measures that make up the consumer confidence barometer fell in January, with the biggest declines in consumers’ assessment of the general economic situation.
“Despite some good news about the easing of COVID-19 restrictions, consumers are clearly bracing themselves for a spike in inflation, rising fuel bills and the prospect of higher interest rates,” said Staton.
UK inflation rose in December to 5.4%, the highest annual rate in nearly three decades. The Bank of England raised its key interest rate in December from 0.1% to 0.25%, and is widely expected to raise borrowing costs again in February.
The Consumer Confidence Barometer’s major purchases index, which measures demand for big-ticket items, fell four points in January, a sign that consumers are willing to tighten their belts, Staton said.
The drop in COVID-19 cases and the ease of restraint are not expected to significantly improve consumer confidence in the short term, as the cost of living squeeze is a concern that won’t go away for months, he said.
The survey questioned around 2,000 people between 4 and 12 January.