Consumer confidence falls as concerns over inflation return

A new survey suggests that many British households are preparing for renewed financial pressure as conflict in the Middle East weighs on economic confidence.

Consumer confidence in the UK fell at its fastest quarterly rate since June 2022, when inflation surged following Russia's invasion of Ukraine and the resulting rise in global commodity prices.

The survey, which measures factors such as spending intentions and how financially secure people feel, recorded a score of -13 in April. That represents a significant decline from -1 in January and marks the weakest reading since autumn 2023.

While confidence has weakened across all age groups, the figures suggest that no part of the population is entirely immune to growing concerns about the economy.

Financial confidence falls across generations

Younger consumers remain more optimistic than older age groups overall, but confidence among under-35s has also deteriorated.

The proportion of younger people who described themselves as financially healthy fell by 20%, while the share reporting that they were struggling or finding it difficult to manage bills and finances increased by 9%.

These figures highlight the growing pressure many households continue to face, despite inflation having fallen significantly from its peak.

Cost-of-living concerns remain widespread

The survey found that concerns about household finances remain firmly linked to the cost of living.

Almost 90% of the 2,068 consumers surveyed said they were concerned about living costs, while nearly 80% said they planned to reduce spending over the next three months.

When consumers begin cutting discretionary spending, the effects can often be felt across a wide range of sectors, particularly those reliant on consumer confidence and household spending.

Rising fuel costs are changing behaviour

Higher fuel prices are already influencing everyday decisions.

The proportion of consumers planning to drive less in order to save money has doubled since January, increasing from 12% to 24%.

While fuel costs are only one part of household budgets, they tend to have a visible impact because they affect commuting, travel and day-to-day living costs almost immediately.

Inflation pressures remain

The Bank of England has indicated that higher UK inflation is likely to be "unavoidable" as a result of the conflict in the Middle East.

Rising fuel, food and energy costs are expected to add further pressure to household budgets in the months ahead.

Recent figures from the Office for National Statistics (ONS) showed that CPI inflation rose to 3.3% in March, up from 3% in February and remaining above the Bank of England's 2% target.

While inflation is significantly lower than the peaks seen in recent years, any upward movement is likely to be closely watched by policymakers, businesses and consumers alike.

What is happening in the jobs market?

The employment picture remains mixed.

Job vacancies fell again in April, marking the 30th consecutive monthly decline. However, there are signs that employers are responding to uncertainty by increasing their use of temporary workers rather than committing to permanent recruitment.

Temporary billings rose at their strongest pace in two-and-a-half years, suggesting that some businesses remain cautious about long-term hiring decisions while economic conditions remain uncertain.

Final thoughts

The latest survey paints a picture of households becoming more cautious as concerns about inflation, energy costs and the wider economy return to the forefront.

While confidence figures can move quickly, they often provide a useful indication of how consumers are feeling and how they may behave in the months ahead.

For individuals and businesses alike, periods of uncertainty reinforce the importance of understanding cashflow, reviewing spending and planning ahead wherever possible.

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