UK consumer confidence slipped to a three-month low in September as households grew increasingly worried about rising interest rates, job security and the cost of living. Retail workers were among those reporting the highest level of employment concern.
The S&P Global UK Consumer Sentiment Index fell to 42.7 in September from 42.9 in August, remaining below the 50 mark that separates positive from negative sentiment.
The survey of 1,500 households found consumers were becoming more reluctant to make expensive purchases such as holidays, cars and household appliances as concerns over their finances intensified.
Job insecurity also reached its highest level in more than three-and-a-half years, with workers across every sector apart from IT and telecoms reporting a deterioration in confidence.
Retail employees were the most concerned about their job prospects in September amid pressure on the sector from employment costs, subdued consumer spending and supply-chain disruption.
The findings were released despite signs of improvement in retail spending over the summer.
Official figures last week showed retail sales volumes rose 0.5 per cent in August and were 2.4 per cent higher than a year earlier. Across the three months to August, volumes increased 0.9 per cent compared with the previous three-month period.
However, S&P Global’s latest survey suggests households are becoming more cautious as expectations of higher borrowing costs increase.
Some 53 per cent of respondents said they expected the Bank of England to raise interest rates, compared with just 12 per cent who believed rates would fall.
The Bank held the base rate at 3.75 per cent earlier this month, although three of the Monetary Policy Committee’s nine members voted for an immediate 0.25 percentage point increase.
Policymakers warned that risks to inflation had moved further to the upside following increases in global energy prices, with UK inflation reaching 3.1 per cent in August.
Rising borrowing expectations have already fed through into mortgage pricing. Average two-year fixed residential mortgage rates reached 5.88 per cent this week, while the average five-year fix hit 5.92 per cent, according to Moneyfacts figures cited by The Guardian.
S&P Global Market Intelligence economist Maryam Baluch said September’s data showed a “downbeat mood spreading across UK households”, as concerns over energy prices, living costs and employment prospects weighed on sentiment.
Consumers were also continuing to draw down savings, with S&P linking the trend to concerns about income and job security alongside greater reliance on credit.
The survey chimes with wider signs of softness in the UK labour market.
ONS figures show the number of payrolled employees fell by an estimated 26,000 between July and August, while the provisional annual decline stood at 145,000.
Meanwhile, vacancies fell to 702,000 in the three months to August, their lowest level since the February-to-April 2021 period.
The weakening mood among households comes just weeks before the government’s 28 October Budget, creating further uncertainty for retailers heading towards the crucial Christmas trading period.
Click here to sign up to Retail Gazette‘s free daily email newsletter
