Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
UK consumer confidence plunged in April to the lowest level in well over a year as concerns over Donald Trump’s global trade war and rising living costs hit household sentiment.
The GfK consumer confidence index — a measure of how people view their personal finances and broader economic prospects — fell four points to minus 23 in April, the research group said on Friday.
The drop from March wiped out gains so far this year and took the reading to its lowest point since November 2023, when households were contending with surging mortgage and rental costs.
Neil Bellamy, consumer insights director at GfK, said households had been hit by “multiple April cost increases” in energy, water and telecoms bills, as well as rises in stamp duty, council tax and road charges.
“They are also hearing dire warnings of renewed high inflation on the back of the Trump tariffs,” he added.
Bank of England policymakers and economists have warned that the tariffs — which are being levied at 10 per cent on UK products and unleashed turmoil across financial markets — will hit economic growth. Their effect on inflation remains unclear, however, given uncertainty over how other countries might respond.
High uncertainty has also hit business sentiment, with private sector activity contracting at the fastest pace in more than two years in April, according to the S&P Global flash UK PMI composite output index.
The worsening consumer sentiment — a shift that could weigh on growth via lower household spending — was confirmed by other measures of confidence this week, with indices provided by the British Retail Consortium and S&P Global both falling in April.
Maryam Baluch, economist at S&P Global Market Intelligence, said consumers’ concerns over disruption to global trade and their personal finances meant “we are likely to see a more prudent approach to purchasing and savings in the coming months”.
Compared with March, consumers were more pessimistic about all measures tracked in the GfK survey, which was conducted in the first half of this month.
Falling household and corporate confidence risks derailing the green shoots shown in official data this year.
In February, the economy beat expectations to grow 0.5 per cent, leaving it on track to beat the BoE’s forecast of a 0.25 per cent increase in the first three months of 2025.
Output in consumer services, such as bars and restaurants, rose 0.6 per cent in the three months to February, the fastest pace in a year, signalling improvements after consumer spending disappointed for most of 2024.
Inflation also fell more than forecast in March to 2.6 per cent, and wage growth remained strong in the three months to February, supporting household incomes, according to official figures published last week.
Consumers have built up sizeable savings since Covid-19, with wages outpacing inflation for nearly two years while spending has remained subdued.
The trend had spurred expectations of a rebound in household consumption: only a few months ago, economists forecast growth of 1.3 per cent this year, more than double the 0.6 per cent registered in 2024.
But those hopes have dimmed: the latest figures from Consensus Economics, which collates projections from leading forecasters, show expectations at just 0.9 per cent.
Friday’s GfK data added to the darker outlook, with the index tracking expectations for the economy in the year ahead dropping by 8 points to minus 37, the lowest level since March 2023.
The future indicator on consumers’ view of their personal finances also “slipped badly”, dropping four points to minus 3, according to the survey.