British consumers are the most pessimistic since immediately after the Brexit vote last year, a long-running survey published today has revealed.
The closely watched GfK poll found consumer confidence dropped to a negative reading of 12 in July, its joint-lowest since December 2013.
Consumers could be faced with declining spending power until the end of next year, according to a separate analysis published yesterday by consultancy Oxford Economics.
Consumers surprised many economists in the aftermath of the EU referendum in June 2016 as they continued spending. Consumer confidence rebounded strongly over the second half of 2016 as the economy continued to perform well.
However, since May of this year confidence has fallen in two successive months as surging inflation has outpaced earnings growth.
Joe Staton, head of market dynamics at GfK, said: “All bets must now be on a further drift downwards in confidence. Yes, employment is booming, but wages have fallen in real terms since 2008 once inflation is taken into account.”
While a fall in inflation from its peak of 2.9 per cent in the year to May back to 2.6 per cent in June has lessened the pace of prices rises, it still remains well above the annual increase in weekly earnings of 1.8 per cent in the quarter to May.
Oxford Economics’ research shows June was marked the biggest decline in Britons’ spending power during the month since 2011, with a £160 dent in the average person’s pocket over the last year.
Andrew Goodwin, lead UK economist at the consultancy, wrote: “While we are probably now at the point at which the decline in spending power is at its greatest, the average person is likely to see their resources eroded further in 2018.
“What’s more, we expect this to occur even in an environment where inflation is forecast to slow significantly through the year.”
The research suggests consumer spending is likely to slow in the coming year, which could harm broader economic growth.