For the seventh consecutive month, British citizens’ confidence in the economy has declined, adding to growing indications that spending restrictions will cause a recession this year.
The pollster YouGov and the Centre for Economic and Business Research’s monthly index of economic sentiment dropped by 1.2 points last month to its lowest level since August 2020, primarily due to household concerns about the state of their finances.
In June, despite the fact that inflation soared to its highest level since 1982, consumer concerns about their personal finances were at their lowest level ever. Since April, almost all workers’ tax burdens have increased along with the price of gasoline.
Rising costs, according to managing economist Josie Dent of the economics consultancy, are reducing disposable incomes and “eroding household purchasing power.” As a result, many people have less money at the end of each month, and some are even being forced to reduce their food budgets, use their savings, or go into debt in order to make ends meet.
When the Office for National Statistics releases the official GDP figures for May, it is anticipated that the economy will have experienced no growth for the previous three months. After blatant contractions in April and March, data is predicted to show 0% month-over-month growth in May.
The economy has been burdened by high inflation, declining consumer spending, and rising taxes, and it is on track to experience its first quarterly GDP contraction since the beginning of 2021. According to CEBR predictions, this year will experience a recession as second and third quarter growth will be negative.
In line with recessionary levels, a different indicator of household confidence from Bank of America decreased by one point last month. Consumers who were surveyed predicted that unemployment would increase from record lows, but that inflation would moderate from record highs this year.
According to Robert Wood, an economist at Bank of America, “The Bank of England can take some comfort that people do not seem to believe on average that the additional large surge in inflation this year will persist in the medium term.”
With nearly all candidates promising to lower taxes on businesses and consumers, the rising cost of living has emerged as a key issue in the race to become the next leader of the Conservative Party. A new prime minister is under increasing pressure to lower fuel taxes, temporarily halt the VAT, and shelve a planned increase in corporation tax for the upcoming year.
