British consumer morale suffered its sharpest drop in more than 26 years after last month's decision by voters to leave the European Union, as Britons became increasingly pessimistic about the economic outlook.
Market research firm GfK said its gauge of consumer confidence fell to -12 from -1 in June, the biggest drop since March 1990 – when Margaret Thatcher was prime minister and Britons were reeling from interest rates rising to 15 per cent.
Interest rates
By contrast, the Bank of England will probably cut rates to a new record low of 0.25 per cent next week, according to economists who say plunging business and consumer morale since the June 23rd vote will spur policymakers into action.
The GfK survey was worse than all forecasts in a Reuters poll that suggested consumer confidence would tick up from a reading of -9 in a one-off “Brexit special” version of the survey published three weeks ago.
The actual reading of -12 was the lowest since end of 2013, and only a little worse than the long-run average of -9.
But pessimism about the economy’s prospects in the next 12 months rose to the highest level since April 2012, when Britain last flirted with recession.
Positive stance
"We've seen a very significant drop in confidence, as is clear from the fall in each of our key measures," Joe Staton, head of market dynamics at GfK, said.
“Its future trajectory depends on whether we enter a new period of damaging economic uncertainty or restore confidence by embracing a positive stance on negotiating a new deal for the UK.”
A separate YouGov/CEBR consumer confidence indicator on Thursday also showed a sharp fall, hitting its lowest level in three years.
Hard data about the impact of last month’s Brexit vote on the economy has been thin so far but surveys last week showed corporate activity shrinking in July at the fastest pace since early 2009, around the nadir of the global financial crisis.
Official figures this week showed Britain’s economy expanded 0.6 per cent in the three months up to its vote to leave the EU, although most of this reflected a surge in output during April.
Economists polled by Reuters this month said it was more likely than not that Britain would fall into recession in the coming year. – (Reuters)
