Despite slightly increased retail sales in June, consumer confidence plummeted last month, taking the GfK NOP poll to minus 30 wiping out the “Royal Wedding effect".
Figures from the last six months show consumers are much more pessimistic about their own prospects and the economy than last year with largely negative consumer views on the general economic situation and their own personal finances
Nick Moon of GfK NOP said: "It's becoming clear that May's positive surge was the exception rather than the norm, as we return to -30, wiping out almost all of May's rise. Before this year, the index has only been lower during the recessions of the early 1990s and mid-2008.
The survey was supported by figures from the CBI showing retailers were hit by a bigger-than-expected drop in sales in July adding to concerns that the economy is struggling to grow and that high streets could see further shop closures and cuts in workers during the summer.
The survey of high-street spending sparked further calls for ministers to reverse tough economic policies.
Labour's shadow chief secretary to the treasury, said cutting the deficit "further and faster than any other major country" was undermining confidence in the British economy.
"Consumer confidence has been on a downward path since the Tory-led government came to power and last year's recovery has been choked off, which will make it harder to get the deficit down."
January's VAT rise to 20% is costing families with children £450 per year and should be reversed to boost confidence and spending.
The British Retail Consortium said in a recent report that retailers had spent the last three months cutting staff and reducing their hours to save costs.
IHS Global Insight economist Howard Archer said "Given the importance of consumer spending, this immediately fuels concerns over growth prospects in the third quarter. Indeed, following on from the markedly weaker CBI industrial trends survey for July, the economy seems to have started off the third quarter on the back foot."
The British economy grew by a meagre 0.2% between April and June after stagnating over the previous six months, increasing the pressure on the government to boost growth. But Chancellor George Osborne's room for manoeuvre is limited under his plan to slash the budget deficit. Some ministers have suggested the Bank of England's monetary policy committee should engage in a fresh round of quantitative easing should the economy stay weak.
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