Household sentiment has edged down to lowest since July 2023, signaling their increasing gloomy about their financial situation, shows the latest S&P Global UK Consumer Sentiment Index released today (May 18).
The CSI index edged down to 42.1 in May from 42.3 in April, signnaling increased pessimism across UK households. It is the lowest level since July 2023 when inflation in the UK was soaring as a result of the Russian invasion of Ukraine.
The index takes a combined figure tracking how people feel about their household spending, financial wellbeing, savings, debt and employment.
Data for May data also indicated that 51 per cent of UK households anticipate a rise in interest rates, compared to only 14 per cent expecting a cut by the Bank of England, pushing the net balance of respondents forecasting a hike up to +37 per cent in May, from +24 per cent in April.
The net balance has now increased for two consecutive months and posted a 31-month high, S&P, noting that the rising cost of living was causing concern over future finances.
Commenting on the survey, Maryam Baluch, Economist at S&P Global Market Intelligence, said, “Households across the UK have become increasingly gloomy about their financial situation in May as the war in the Middle East show no signs of ending soon."Outside of the pandemic and Ukraine-related energy price spike, we have not seen households this downbeat since 2012.
“Inflation worries have firmly taken centre stage. The rising cost of living is eating into savings at a rate not seen in nearly three years, and is causing concern over future finances, in part due to growing conviction that interest rates are soon going to start rising.
“The uncertain climate fuelled by the war has meanwhile exacerbated existing worries over domestic government policy, pushing job insecurity to its highest for just over three years.
“Not surprisingly, this environment of squeezed finances, worries of higher interest rates and job insecurity is deterring spending to a degree rarely witnessed by the survey, which in turn looks set to dampen economic growth.”
The survey, which has been collected monthly since 2009, is based on a panel of 1,500 UK households. The headline index is a combination of gauges tracking household financial wellbeing, labour market conditions, household spending, savings and debt with the latest data collected between May 7 – 11.
Policymakers at the Bank of England have indicated they will probably need to lift rates at some stage this year if global oil prices remain elevated and force inflation higher. The Bank has also warned that typical energy bills are likely to rise 16% to £1,900 by the summer and food prices will surge 7% by the end of the year, due to the US's war of choice on Iran.