George Osborne's Budget has depressed consumers so much that their lack of confidence in the economy has returned to the levels last seen during the depths of the recession.
The latest Markit/YouGov survey provides the first snapshot of opinion since the 22 June Budget, and shows that sentiment is down at where it stood at the start of 2009.
The July survey data showed a further deepening in households' pessimism regarding their current and future financial situation. Around six times as many households reported a deterioration in their finances as those stating that things had improved. Almost half of UK households anticipate a deterioration in their household finances in the next 12 months, compared with a fifth who forecast an improvement.
The loss of confidence is spread across the classes, and seems to be also derived from pessimism about the prospect of pay rises which are unlikely to keep pace with inflation, if they happen at all. Expectations of inflation during the next 12 months rose to a series-record high in July.
Tim Moore, an economist at Markit, commented: "Households' pessimism about their future finances has returned to levels not seen since the economy was in freefall towards the beginning of 2009."
The Chancellor's announcements about a public-sector pay freeze for those on more than £21,000 a year has had an especially downbeat effect among those working for the state and local government.
Official data last week showed that retail sales rose in June, helped by the World Cup, but few economists expect the trend to be sustained as tax hikes and job cuts slice into household budgets. Analysts at Capital Economics say that real household disposable incomes will stagnate in the next two years, and by 2014, incomes will be 8 per cent lower than they would have been – equivalent to £3,000 per household.Reuse content