The morale of British shoppers has fallen to its lowest level since the beginning of the Iraq war in 2003, a gloomy pre-Christmas survey of consumer confidence warned yesterday. The GfK/NOP consumer confidence barometer fell for a fifth consecutive month in November, as the effect of interest rate rises filtered through to borrowers and financial crises continued.
The survey makes particularly worrying reading for retailers, warning that consumers' willingness to make major purchases is down to levels last seen in 1995. "With petrol prices racing past 1 a litre, food prices on the increase and the prospect of higher mortgages resulting from the credit crunch, even the most optimistic consumers now seem to view their glass as half-empty," warned Rachael Joy of GfK.
Howard Archer, chief UK and European economist at Global Insight, added: "While there is not always a close relationship between consumer confidence and actual spending, it does seem highly likely that consumption will be dampened over the coming months by the marked overall increase in interest rates since August 2006, muted real disposable income growth, heightened debt levels and a markedly weaker housing market."
Analysts were also concerned at the evidence of heightened expectations of inflation caused by "high visibility" rising food and energy prices. GfK/NOP also conducts the Bank of England's survey of inflation perceptions and this data will be available to the Monetary Policy Committee when it meets on Thursday.
Some members of the MPC told MPs this week of their concern about inflationary expectations and in particular about how they would feed through to wage demands and then price increases. The hawks on the MPC will be even more wary about cutting rates next week having seen the latest pay award figures released yesterday by Income Data Services. Inflation-busting pay deals in the motor industry pushed wage inflation to 3.5 per cent in the three months to November, up from a one-year low of 3.2 per cent in the three months to October. The survey cited a 4.7 per cent pay increase at Ford, a 4.4 per cent increase at Jaguar and a 5 per cent increase at Land Rover as examples of pay increases that took effect this month.Reuse content