Rise in inflation hits consumer confidence in October, says GfK

Rising inflation due to a weak pound and concerns about Brexit have taken their toll on consumer morale in Britain, a survey said on Friday.

The GfK consumer confidence index fell to -3 in October from -1 the previous month, which confirmed the forecast consensus, but above the -12 decrease in the wake of the the EU referendum result.

Joe Staton, head of market dynamics at GfK, said the fall in consumer confidence reflected an increase in inflation with shoppers anxious about a rise in prices.

The Office for National Statistics said inflation in September rose to 1%, its highest since 2014.

“Declining optimism about economic prospects for the wider UK economy has depressed the consumer mood this month. Despite the continuing feel-good factor arising from persistent low interest and inflation rates, sterling’s sharp decline is arguably stoking fears that price rises will hit UK living standards hard next year”

However, he said the views of people’s personal financial situation for the past year and next year remained positive, compared to 2015, as “we feel more optimistic about situations we can control”.

The index for households’ confidence about the outlook for their personal finances, slipped slightly to +6 from +7, in contrast, the index for major purchases increased to +14 from +9.

Samuel Tombs, chief UK economist, at Pantheon Macroeconomics, said consumer confidence remains high by past standards as the October reading is only just below its twelve-month rolling average and it is stronger than two-thirds of all past readings since 1974.

“Nonetheless, rising inflation and the perception that hard Brexit risks have increased are beginning to dampen sentiment. The fall in the composite index primarily reflected a sharp decline in the economic optimism balance to -17, from -9 in September.

“Going forward, we continue to think that consumer confidence will embark on a downward path as inflation continues to rise and job prospects worsen.”

A similar survey by YouGov and the Centre for Economic and Business Research (CEBR) reported that consumer confidence also decreased in October to 109.3 from 111.5 in September.