UK consumer confidence falls amid concern over persistent inflation

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UK consumer confidence waned in February, according to research company GfK, suggesting that the early optimism for 2024 has abated in the face of persistently high inflation.

The consumer confidence index, a leading indicator of consumer spending that measures people’s views of their personal finances and the state of the economy, fell to minus 21 in February from a two-year high of minus 19 in January. The reading followed three consecutive months of increases.

Driving the change were two-point month-on-month decreases in both consumers’ assessment of their personal financial situation and their views on the general economic situation in the past 12 months. These were probably driven by inflation remaining at 4 per cent in January, analysts said.

“Fears that inflation is about to return and the associated erosion of purchasing power will have had a negative influence,” said Tomasz Wieladek of T Rowe Price.

Consumer confidence in the economic outlook for the next 12 months also declined in February, down by three points to minus 24, as markets start to price an increasingly hawkish scenario for the Bank of England after inflation remained flat in January. 

“There is a mixture of bad news and good news for February,” said Joe Staton, client strategy director for GfK. “The bad news is that the improvement in the overall index score seen over recent months stalled slightly . . . the good news is that optimism for our personal financial situation for the next 12 months has not slipped back.”

Consumers’ expectations for their personal financial situations for the coming year did not change from January, holding steady at 0. January was the first time this rating had been positive since December 2021.

“This metric is key to understanding the financial mood of the nation, because confident householders are more likely to…