Consumer Confidence Drops as Economic Anxieties Grow

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Consumer confidence dropped in January amidst growing anxiety about the UK economic outlook.

The UK's leading measure of consumer confidence fell five points to -22 in January, with all sub-component measures of confidence falling from December.

GfK, compilers of the report, said perceptions of the UK economic outlook appear to be leading the trend as "consumers see dark days ahead".

"New Year is traditionally a time for change, but looking at these figures, consumers don’t think things are changing for the better," says Neil Bellamy, Consumer Insights Director, NIQ GfK.

There survey revealed steep falls in consumer views on the UK economy, both looking back a year (down seven points) and at what’s in store for the next 12 months (eight points lower).

The data comes in the same week that the ONS reported another rise in the country's unemployment rate and a week after new data showed the economy was on track to record no growth in the final quarter of the year.

"Weakening labour market conditions ought to be disinflationary on balance. Alongside brittle confidence, this backdrop is likely to reinforce the virtuous habits UK consumers have discovered post-Pandemic, higher savings rates and less consumption. These conditions are not necessarily recessionary, but zero growth, where we currently sit, feels much like the same thing," says Nick Kennedy, an FX analyst at Lloyds Bank.

The GfK survey's Savings Index verifies this assessment, having leapt nine points in January to +30.

"This sharp increase is unwelcome because it’s another sign that people see dark days ahead and are therefore thinking of putting money aside for safety," says Bellamy.

"Consumers are the backbone of the UK's services-orientated economy. Their retreat suggests Chancellor Rachel Reeves will struggle to find the economic growth she needs to fund her ambitious spending plans," says Matt Lewis at TopMoneyCompare.com.

GfK says its latest findings underline that consumers are losing confidence in the UK’s economic prospects.

"The weakness of GfK-measured consumers’ confidence in January echoes a chorus of surveys reporting weakening consumer and corporate sentiment, as payroll tax hikes, rising bond yields and surging global economic uncertainty following Mr. Trump’s election weigh," says Robert Wood, Chief UK Economist at Pantheon Macroeconomics.

The breakdown of the consumer confidence report:

Personal Financial Situation
The index measuring changes in personal finances during the last year is down three points at -10; this is two points better than January 2024.

The forecast for personal finances over the next 12 months is also down three points at -2, which is two points lower than this time last year.

General Economic Situation
The measure for the general economic situation of the country during the last 12 months is down seven points to -46; this is five points lower than in January 2024.

Expectations for the general economic situation over the next 12 months have dropped eight points to -34; this is 13 points worse than January 2024.

Major Purchase Index
The Major Purchase Index is down four points to -20; this is the same as this month last year.

Savings Index
The Savings Index has jumped nine points to +30; this is three points higher than this time last year.