The biggest fall in customer confidence has been recorded since the 1992 recession, according to market research group GfK Nop’s January Consumer Confidence Index.
A combination of factors have been blamed for the eight-point drop in in sentiment, ranging from this month’s VAT rise to the post-Christmas blip, where consumers notably tighten their collective belts.
It is for these reasons, as well as the impending public sector cuts that are sure to cause uncertainty, that GfK Nop believes people’s confidence in making a major purchase has been hit.
Nick Moon, Managing Director for the market analysts, said: “January’s eight-point drop represents an astonishing collapse in consumer confidence.
“In the 35 years since the index began, confidence has only slumped this much on six occasions.
“The VAT increase is the first of the government’s austerity measures that has had a widespread impact on consumers, and it seems to have hit people’s economic confidence hard, especially as the biggest drop was in consumers’ appetite for major purchases.”
Retailers are aware of the potential problems for the year ahead, with many predicting flat growth for the next 12-month period.
Indeed, the true impact of falling consumer confidence on the industry is likely to be felt in the next two months now that the January sales period is over.
At the end of last summer CEO of Next Simon Wolfson warned: “We will have to adapt to a new type of consumer environment, one in which like-for-like sales growth is likely to be low for some time and top line growth will need to come from other opportunities.”