Consumer confidence in the state of the economy and their ability to spend was lifted by the pause of the Iran war, however economic uncertainty is still weighing on shoppers’ minds, according to a well-followed sentiment tracker.
When looking ahead over the next three months, shoppers generally felt more optimistic in May than they had done in previous months according to the BRC-Opinium sentiment tracker.
Expectations on the state of the economy rose by 5 points to –48, up from –53. It coincided with an improvement in how they viewed their own personal financial situation, which improved from –21 in April to –16 in May. Shoppers expected their personal spending on retail to increase, particular on food, with sentiment improving from +5 to +7 in May.
However, it was far from a vote of confidence as shoppers braced themselves for tough times ahead, with the full impact still yet to come through in food prices and fuel. The proportion of shoppers anticipating food prices to increase rose to 82%, up from 80%. Around 83% anticipated an increase in energy bills, up from 81% in April.
“Consumer confidence, while firmly negative, saw a slight lift in May following signs of de-escalation in the Middle East,” said Helen Dickinson, BRC CEO.
“Younger consumers drove this improvement in expectations for the economy and household finances, helped by rising real wages among this generation. But the outlook remains fragile: inflation is set to rise, and more than four in five people expect food prices to climb.”
The figures come amid a fierce battle between the government and supermarket bosses, after it emerged No 10 planned to pressure retailers to introduce price caps on essential groceries – proposals M&S CEO Stuart Machin labelled as “preposterous”.
Separately, yesterday Chancellor Rachel Reeves announced Labour would extend the 5p cut in fuel duty until the end of the year in a bid to ease pressure on shoppers. The Treasury also announced an additional 12-month holiday on HGV vehicle tax for hauliers, as well as reduction in the duty of red diesel to help farmers.
Dickinson urged the government to go further to help ease the burden on British shoppers.
“If government wants to keep consumer confidence heading in the right direction, it must now make a choice: act now, or let these inflationary pressures spiral, pushing up prices for households,” she said.
“Energy prices are pushing up costs for retailers and their supply chains, with the government’s energy taxes and levies making up as much as 65% of business bills. Cutting these charges is the fastest way to ease inflation and support consumer confidence. Delay will only make the next cost of living squeeze harder for households.”
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