British consumers turned more pessimistic in January as the spread of the COVID-19 omicron variant and high inflation weighed on households’ outlook of the economy and spending plans, according to a survey by the research firm GfK.
GfK’s consumer-confidence barometer fell to minus-19 in January from minus-15 in December, the lowest level since February 2021. Economists polled by The Wall Street Journal expected the confidence index to retreat slightly to minus 16.
“The U.K.’s financial pulse weakened further this January driven by concerns over personal finances and the general economic situation,” GfK’s client strategy director Joe Staton said.
All five measures that form the consumer-confidence barometer decreased in January, and the steepest declines were registered in consumers’ assessment of the general economic situation.
“Despite some good news about the easing of COVID-19 restrictions, consumers are clearly bracing themselves for surging inflation, rising fuel bills and the prospect of interest rate rises,” Staton said.
Inflation in the U.K. increased in December to 5.4%, the highest annual rate in almost three decades. The Bank of England raised in December its benchmark interest rate to 0.25% from 0.1%, and it is widely expected that it will raise borrowing costs again in February.
The major purchase index of the consumer-confidence barometer, which gauges demand for big-ticket items, declined four points in January, in a sign that consumers are ready to tighten their belts, Staton said.
Falling COVID-19 cases and the ease of restrictions aren’t likely to improve consumer confidence significantly in the short-term as the cost of living squeeze is a source of concern that won’t disappear for months to come, he said.
The survey polled around 2,000 individuals between Jan. 4 and Jan. 12.