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(Sharecast News) - UK consumer confidence hit its lowest level since July 2023 as household savings come under increasing pressure driven by worries over rising prices due to the Iran war, according to a survey published on Monday.
The S&P Global UK Consumer Sentiment Index (CSI) edged down to 42.1 in May from 42.3 in April - its third consecutive fall.
Data for May data also indicated that 51% of UK households anticipate a rise in interest rates, compared to only 14% expecting a cut by the Bank of England, pushing the net balance of respondents forecasting a hike up to +37% in May, from +24% 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.
"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," said Maryam Baluch, economist at S&P Global Market Intelligence.
"Outside of the (Covid) pandemic and Ukraine-related energy price spike, we have not seen households this downbeat since 2012. Inflation worries have firmly taken centre stage."
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.
"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," Baluch said.
Reporting by Frank Prenesti for Sharecast.com