Mounting fears about the cost-of-living crisis have knocked consumer confidence for a second consecutive quarter, a survey has found.
Deloitte’s consumer confidence tracker fell by 1 percentage point to minus 11 per cent in the final three months of last year. It comes after the gauge also fell by 1 percentage point in the third quarter of 2021 and adds to evidence that households are increasingly worried about their finances.
The government is under increasing pressure to do more to help Britons who face a squeeze from spiralling energy costs, soaring inflation and rising taxes.
Surging gas prices on world markets in recent months prompted Ofgem, the energy regulator, to lift its price cap last week in a move that will result in a 54 per cent rise in energy bills to £1,971 a year for 22 million households from April. National insurance is to rise in the same month in a further blow to household finances.
Surging energy prices are boosting inflation, which the Bank of England forecasts will hit 7.25 per cent in April. In response ratesetters at the Bank last week lifted the base interest rate to 0.5 per cent from 0.25 per cent. The move is aimed at tackling price rises and will push up the cost of floating-rate mortgages and other borrowing, tightening the squeeze on consumers.
According to the Deloitte tracker, 41 per cent of consumers experienced a rise in personal expenditure in the last quarter of 2021, up from 36 per cent in the previous three months. About three quarters blamed rising prices.
Respondents were also downbeat on the wider outlook, sentiment about the state of the economy declining by 8 percentage points quarter on quarter to a net balance of minus 53 per cent. This was the lowest level since the first three months of last year, when the economy was gripped by lockdown measures to counter the spread of Covid-19.
The findings are based on an online survey of 3,177 consumers by YouGov between December 31 and January 5. Deloitte is one of Britain’s “Big Four” accounting and professional services firms.
Ian Stewart, Deloitte’s chief economist, said: “Sharply higher inflation and a squeeze on consumer spending power has hit consumer confidence. With nflation set to rise further a tough few months are in prospect. However, high savings, strong consumer balance sheets and rising employment should help soften the blow to spending caused by higher inflation.”
Lockdowns meant spending on leisure activities dropped in the depths of the pandemic, helping households that were not hit by job losses during the crisis to increase their savings pots.
Deloitte’s findings came as John Allan, Tesco’s chairman, warned of further food price rises this year. He told the BBC’s Sunday Morning programme that “the worst is still to come”. He expected food prices to be rising by about 5 per cent in spring, up from 1 per cent inflation at Tesco in the last quarter.
Read more:
Deloitte survey finds that consumer confidence declines as prices rise
