Consumer confidence slumps following warnings of ‘tough choices’ in budget ahead

A lengthy-running measure of user confidence has slumped to stages closing seen originally of the year following warnings of “tough choices” ahead in the looming budget.

GfK’s User Confidence Index fell seven points in September to minus 20, with vital drops in predictions for inner most finances and the original economy over the coming year.

The story’s authors advised it was “not encouraging news” for the novel authorities, which has made growing the economy its prime priority.

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Nonetheless within weeks of taking the post of chancellor, Rachel Reeves – adopted by prime minister Sir Keir Starmer – moved to warn of a legacy £22bn “black hole” in the public finances and stated it could consequence in a painful budget on 30 October.

Among measures already taken include cuts to winter gas funds, leaving as much as 10 million pensioners as much as £300 worse off, and inflation-busting public sector pay settlements.

Tax rises and spending cuts are broadly expected in next month’s assertion to MPs though The Instances reported on Friday that a resolution by the Financial institution of England to unhurried a programme of loss-making bond sales would go Ms Reeves £10bn better off than she had anticipated.

It added that she was restful expected to push ahead along with her budget plans anyway as a signal of her commitment to fiscal discipline.

The latest snapshot on the public finances, launched by the Office for Nationwide Statistics (ONS) on Friday showed obtain borrowing of £13.7bn during August.

Its chief economist, Grant Fitzner, stated: “Borrowing was up by over £3bn last month on 2023’s figure, and was the third highest August borrowing on record.

“Central authorities tax receipts grew strongly, however this was outweighed by increased expenditure, largely driven by advantages uprating and increased spending on public services attributable to increased running prices and pay.”

Consumer spending accounts for around 60% of the UK economy.

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Information launched individually on Friday showed a 1% upward push in retail sales volumes during August in the wake of weakness, mostly blamed on melancholy weather, over the old couple of months.

The ONS stated that the increase was driven by grocery store sales, as inquire of for BBQ food and drinks rose attributable to the arrival of some sunshine over the main vacation month.

It also credited discounting by clothing shops.

The information chimes with primarily the most up-to-date updates from mountainous shops, including Subsequent and B&Q’s proprietor, which have spoken of obsolete inquire of for therefore-called mountainous imprint objects equivalent to dwelling furnishings and kitchens respectively.

GfK’s intently-watched search for showed expectations for the original economy over the next 12 months fell by 12 points to -27, while the forecast for inner most finances was down nine points to -3.

Read extra:
Winter gas funds – are you continue to eligible?
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Commenting on its key measures, including the headline determine, user insights director at GfK Neil Bellamy stated: “These three measures are key forward-looking indicators so despite stable inflation and the prospect of further cuts in the base interest rate, this is not encouraging news for the UK’s new government.”

He added: “Strong consumer confidence matters because it underpins economic growth and is a significant driver of shoppers’ willingness to spend.

“Following the withdrawal of the winter gas funds, and clear warnings of further refined choices to reach on tax, spending and welfare, customers are nervously awaiting the budget choices on October 30.”