UK consumer confidence, spending and mobility dropped in October as coronavirus infections rose and restrictions tightened across the country, fuelling fears of a double-dip recession.
Data from research company GfK showed that the UK consumer confidence index tumbled 6 percentage points to minus 31 in the first half of October.
This is the lowest reading since May, with consumers becoming more pessimistic about both the general economic situation and their personal financial conditions.
“There’s a worrying threat of a double-dip in consumer confidence,” said Joe Staton, GfK’s client strategy director. With the data collected before the new round of Covid-19 restrictions, “expect the autumn chill to give way to much stormier conditions”, Mr Staton added.
“Whatever the cause, rules or voluntary distancing [consumer surveys show] consumers pulling back in aggregate,” said Robert Wood, chief UK economist at Bank of America, adding that a deterioration in purchasing intentions “point to an increasing likelihood of a double-dip recession”.
The figures were published as the retail consultancy Springboard showed footfall, which tracks the number of people in stores, decreasing across all UK regions in the week ending October 18 compared with the previous week.
“Given the key role that the consumer played in the economy’s bounce back in the third quarter, any sign of weakened confidence, reduced footfall and softer spending is a serious concern and will fuel expectations that the UK economy is headed for renewed contraction,” said Howard Archer, chief economic adviser to EY Item Club.
Figures from Fable Data, a company that tracks bank transactions, showed the annual change in spending for pubs and restaurants contracted in the week ending October 18, reversing September’s expansion and despite growth in spending on food deliveries.
“Fast food and food delivery spend growth [offset] some of the spend decline,” said Avinash Srinivasan, equity analyst at Fable Data. “This trend is not too dissimilar to the one we saw at the beginning of the pandemic, albeit is less pronounced.”
Spending on fuels and transport also deteriorated, resulting in weakening overall consumer spending in the third week of October, Fable data showed.
“We think the most likely scenario is that the recovery temporarily pauses through the winter,” said Andrew Goodwin, chief UK economist at Oxford Economics. “[But] if the restrictions become more widespread or long lasting, then it is likely that activity would temporarily fall during the winter.”
Weakened consumer data raises concerns about further job cuts and for the mounting public debt amid costly government support schemes, including the revamp of the new job support scheme, announced on Thursday.
Business turnover also started to deteriorate in October, according to a survey run by the Office for National Statistics across nearly 6,000 businesses and published on Thursday. It found that the share of businesses reporting decreased turnover rose in the two weeks to October 4, for the first time, after a steady decline since May.
The deterioration in business turnover could forebode further declines in GDP, which are published with a longer time lag, as “turnover estimates . . . broadly reflect the published UK monthly gross domestic product estimates”, the ONS said.