Falling house prices and rising food and energy bills have prompted the biggest slump in consumer confidence since the last UK recession eighteen years ago.
A consumer confidence report by GfK NOP has revealed a mood of deep gloom that has engulfed consumers over the past year.
Rachael Joy at GfK NOP said: "UK consumer confidence continues its decline and we are seeing levels not recorded since 1990. We are a massive 27 points lower than this time last year. Consumers' confidence in the economy over the next year, plus a reluctance to make major purchases, reflect the popular expectation of a recession - both these measures are at the lowest level on record."
Although government figures show that the economy grew by 0.4% in the first three months of 2008, today's news of a five-point drop in consumer confidence to minus 29 last month continues a trend that began with the onset of the global financial crisis in August last year.
Hardly suprisingly, the survey found that consumers have never been so reluctant to make a major purchase, such as a washing machine or furniture.
City economists said the mood of pessimism among the population pointed to further drops in consumer spending and house prices in the summer, particularly since the Bank of England has expressed doubts about cutting interest rates.
Michael Saunders, UK economist with Citigroup, said "Consumer confidence has already plunged and surveys suggest retail sales growth is weakening very sharply. Worse lies ahead as the lagged effects of housing come through, as well as the erosion of real incomes from rising inflation and mounting job losses”.
"The UK economy is heading close to recession. Over time, the Bank of England is likely to cut rates more than markets price in. Nevertheless, the surge in inflation and inflation expectations makes early Bank easing very unlikely."
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