May 11, 2022 04:47AM ET
By: AnalysisWatch
The tide of hopelessness that has gripped British households is unprecedented among major European economies and suggests that the government may have misjudged its response to the high cost of living.
So far, Finance Minister Rishi Sunak has resisted calls to extend support measures for households, saying he would review the situation again in the second half of the year when energy prices are expected to go higher again.
However, some of the economic data suggest that a more urgent approach may be warranted.
Last month, the widely watched GfK survey showed that the public's confidence in their personal finances had fallen to its lowest level since records began in 1985, and sentiment about the economic outlook has also approached an all-time low.
That was before the Bank of England's stark warning last week that the U.K. faces a double whammy: inflation above 10% and a possible recession as the BOE raised interest rates to the highest level since 2009.
While people across Europe are facing the highest inflation rates in decades—reflecting pandemic-damaged supply chains and rising energy prices—and consumers across developed economies are pessimistic, the complete collapse of confidence is an acute U.K. concern.
Comparable, non-seasonally adjusted data from the European Commission's monthly consumer survey-which included the UK's pre-Brexit GfK survey-shows that there is more pessimism in the UK about household finances and the wider economy than in any other of the EU's 10 largest economies.
Among all EU countries, only consumers in Greece were more pessimistic.
Spain has cut taxes to lower consumers' bills and announced €16 billion in direct aid and low-interest loans to help businesses and households cope with rising energy prices.
British consumer confidence is now at a level that reliably points to a recession.
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