Consumer confidence falls again amid ‘despondent mood’ ahead of October Budget

GfK’s 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.

The drop was significantly less than the seven-point plunge in September. Experts said that was also driven by Labour’s gloomy messaging around the spending statement in late October.

Chancellor Rachel Reeves has repeatedly warned of “tough choices” to tackle what she has called a worse-than-expected inheritance from the previous Conservative government.

Neil Bellamy, consumer insights director at GfK, said consumers are still in a “despondent mood” despite a recent fall in the headline rate of inflation.

He added: “This month’s Consumer Confidence Barometer paints a picture of people holding their breath to see what’s in store for them on October 30.”

Inflation fell to a three-year low earlier in October, which some economists say virtually guarantees the Bank of England will cut interest rates at its next policy meeting in November.

Cutting rates could encourage further falls in mortgage rates, making things easier for would-be 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.

The forecast for personal finances over the next 12 months improved by one point at minus two, however, which is six points higher than this time last year.

The consumer poll comes after a closely-watched survey measuring business confidence also showed worsening conditions ahead of the Budget.

Activity across the UK’s private sector slipped to an 11-month low in October, according to the S&P Global flash UK composite purchasing managers’ index.

Linda Ellett, UK head of consumer, retail and leisure for KPMG, said: “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.”

Ms Ellett said KPMG’s own research showed that people aged 65 and over are most likely to expect their financial security to worsen in the next six months.

“Rising energy costs, winter fuel allowance cuts and the potential inclusion of pension-related measures in the forthcoming Budget may be factors that are reflected in this finding,” she said.

“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.”