Consumer confidence falls ahead of autumn Budget as 'despondent mood' takes over

The GfK Consumer Confidence Index fell one point in October to minus 21, as people's predictions for the general economy worsened over the coming year despite a slight improvement in their forecasts for personal finances

Consumer confidence has fallen again, with a recent survey revealing a decline in sentiment ahead of the autumn Budget.

The GfK Consumer Confidence Index dropped by one point in October to -21, as people's expectations for the general economy over the next year worsened, despite a slight improvement in their personal finance forecasts. This decline, however, was less significant than the seven-point drop in September, which experts attribute to Labour's gloomy messaging around the upcoming spending statement.

Chancellor Rachel Reeves has repeatedly warned of "tough choices" to address the worse-than-expected inheritance from the previous Conservative government. According to Neil Bellamy, consumer insights director at GfK, consumers remain in a "despondent mood" despite the recent decrease in inflation.

He noted that the Consumer Confidence Barometer suggests people are anxiously awaiting the outcome on October 30. With inflation reaching a three-year low earlier in October, some economists believe the Bank of England will likely cut interest rates at its next policy meeting in November, potentially leading to further decreases in mortgage rates and making it easier for prospective homebuyers.

That did not improve perceptions of how the wider economy will do in the coming year. GfK’s measure of expectations for the general economic situation over the next 12 months fell one point to minus 28.

On a brighter note, the forecast for personal finances over the coming year has edged up by one point to minus two, which is still six points higher than last year at this time. This consumer sentiment survey follows on the heels of a business confidence report that also signals tougher times ahead, with activity across the UK’s private sector hitting an 11-month low in October, as per the S&P Global flash UK composite purchasing managers’ index.

Linda Ellett from KPMG commented: "Consumer confidence continues to be influenced by three things: essential costs for households, job security in a toughening labour market, and perception about the economic climate on the horizon."

She noted that KPMG's research indicates those aged 65 and above are bracing for a decline in financial security over the next six months, possibly due to rising energy costs, winter fuel allowance cuts, and potential pension changes in the upcoming Budget. Ellett added: "The link between consumer confidence and spending is not as strong as historically, so retailers and their suppliers will be hoping that they can outperform consumer confidence through Black Friday and Christmas."