Consumer confidence slips as Britons’ household finance concerns increase

• Consumer confidence falls by a full point in January 2022
• Household finance measures for the previous month (-3.0) and the next 12 months (-2.4) take an instant hit as cost-of-living crisis mounts
• Mixed bag for business as short-term confidence declines (-2.8) but confidence for the year ahead improves (2.4)

• For the second month running, home value measures increase – seeing a 1.8 improvement for both metrics

The (then-speculative) increase in UK energy bills has already had an impact on consumer confidence, according to the newest analysis from YouGov and the Centre for Economics and Business Research (Cebr). While the overall index saw a decline of just one point from 110 to 109.0, scores across every metric except home value measures and business activity for the year ahead fell – in some cases, dramatically so.

YouGov collects consumer confidence data every day, conducting over 6,000 interviews a month. Respondents answer questions about household finances, property prices, job security, and business activity, both over the past 30 days and looking ahead to the next 12 months. While the rising energy price cap (reportedly set to cost millions of Britons as much as £693 per year) was announced in early February, January saw plenty of speculation that bills would significantly increase across the country. Against this backdrop, confidence in household finances took an immediate blow: scores for the past month deteriorated from 83.7 to 80.6, while outlook deteriorated from 83.6 to 79.1.

Business activity measures were a mixture of good and bad news. While scores for the past month went from 111.7 to 108.9 (perhaps indicating a post-Christmas slump), scores for the next 12 months increased from 124.7 to 127.1: an increase of 2.4 points that effectively wipes out the 2.4 point loss of confidence from December 2021.

Along with business owners, homeowners also had reason to be cheerful in January 2022 – with house prices at their highest level since 2005. For the third month in a row, measures for the past month and the 12 months ahead increased; in February 2022, both rose by 1.8 points.

Darren Yaxley, Head of Reputation Research at YouGov: “Consumers’ economic outlook at the start of the year reveals a complicated picture. Although the headline consumer confidence slipped by a point in January, there was a lot going on under the surface that shaped their economic optimism. While consumers’ outlook for their household finances has not been as bleak since the autumn of 2013 homeowners’ views of the property market have not been this strong since September 2014. Both are likely to be shaped over the coming months by announcements that took place at the start of February, after this data was collected – the announcement of the increase in the energy price cap and the Bank of England raising interest rates.”  

Sam Miley, Senior Economist at Cebr: “This month’s drop in the YouGov/Cebr Consumer Confidence Index highlights the impact of the rising cost of living on household sentiment. Away from the headline indicator, consumers’ assessment of their finances over the coming year provides for a particularly stark reading - reaching a near nine-year low. Rising inflation and the planned uplift to National Insurance contributions are just two likely factors behind this weaker outlook. This sentiment is also mirrored in Cebr’s latest forecasts, with real disposable incomes expected to fall year-on-year and the household savings ratio set to narrow significantly.”