British consumer confidence dips as economic clouds loom – but there's still a silver lining

Jasper Jolly
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Uncertainty around the outlook has increased, but some consumers are still confident (Source: Getty)

Consumers grew more wary in April as rising inflation saw the outlook on the UK economy deteriorate in the face of rising prices.

Overall consumer confidence dipped further to an overall negative level of minus seven in April, down one point further from March, according to the measure by GfK.

Meanwhile a separate survey by Yougov and the Centre for Economics and Business Research (CEBR) shows confidence falling to its lowest level since the EU referendum, driven lower by expectations over their household financial situation.

Read more: Consumers more wary as rising prices threaten British spending boom

Rising inflation is expected to weigh on consumers’ finances by many economists as wages fail to keep up, despite the strength of recent aggregate measures of the UK’s economic output.

Concerns over the UK’s economic situation dipped to nine points below the same point last year, according to GfK’s poll.

Prices have been boosted by the weaker pound since the referendum result, as relatively more expensive imports pushed consumer inflation to an annual rate of 2.3 per cent in March.

Increased prices have seen retail sales fall in recent months, in a sign British consumers may be moderating their spending as their wages fail to keep pace.

Read more: Worrying signs surround the UK's consumer spending boom

Consumer spending remained strong over the second half of 2016, surprising many economists, including government forecasters, with its resilience.

Any decline in consumers’ spending power would likely feed through into slower economic growth. Economists expect government figures released today to suggest this was the case.

Nina Skero, head of macroeconomics at CEBR, said: “Consumer confidence has been on the cusp of a decline for a while and it has now tipped over and fallen.”

However, GfK’s survey also shows consumers to be surprisingly confident in their own finances.

Read more: Rate hike caution needed as consumer slowdown looms says BoE official

While respondents saw their own financial situation dipping further, the measure still remains positive on balance.

Joe Staton, head of market dynamics at GfK, said: “In the face of widespread reports of rampant inflation, stagnating wages and anxiety over our borrowing binge, UK consumer confidence is surprisingly stable.”

He added: "For the moment, consumer sentiment remains relatively buoyant as we enter our two-year window of renegotiation and navigate the run-up to the General Election.”

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