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<p>Consumers in the UK were feeling optimistic at the beginning of 2024, but now they’ve hit a wall: inflation rates are still very high. The latest results from the research company GfK show that consumer confidence is falling. Clearly, the&nbsp;Brits are not alright.<a href="https://www.ft.com/content/52ada56c-5e05-4759-9c23-3b66f70a1e3b" rel="nofollow noopener" target="_blank"> </a></p> 
<h2 class="wp-block-heading" id="the-numbers-tell-the-story">The Numbers Tell the Story</h2> 
<p>The GfK consumer confidence index, which measures how people feel about their own finances and the economy, dropped from a mild minus 19 in January to a disappointing minus 21. The decrease ends a short streak of three months of steady rises, which suggests that the short-lived sense of financial security may have been just that—fleeting.</p> 
<p>There are a few important reasons why the dip happened. First, people’s estimations of their cash situation over the past year have gone down by two points. In the same way, their view on the economy as a whole has gotten worse by the same amount. Analysts think that the persistently high inflation rate of 4% in January is the main cause of this growing gloom.</p> 
<p>What people think about the economy across the next twelve months has also gotten worse, dropping by three points to minus 24. The market is expecting the Bank of England to take a tougher stance in response to the fact that inflation stayed the same in January.</p> 
<p>Joe Staton from GfK tries to find an upside by saying that even though the general confidence index has stopped moving forward, people in the UK are still optimistic about their personal finances over the next 12 months. Staton stresses how important this finding is by saying that a family that is sure in its finances is more likely to spend, even when the cost of living is high.</p> 
<h2 class="wp-block-heading" id="a-comparative-perspective">A Comparative Perspective</h2> 
<p>UK mood goes downhill, but our European neighbors seem to be riding a different wave. Consumer confidence is going up a lot across the continent. This difference makes the story more complicated, especially when put next to the rise in retail sales in January and the unexpected rise in business activity in the UK in February. This kind of data usually means that the economy is waking up, but the rise in mortgage rates and the recession&nbsp;have made UK consumers careful.</p> 
<p>However, hope is not lost. Investec’s Ellie Henderson lists a number of things that could make people feel better, such as the expected end of quantitative easing, a drop in national insurance, and strong pay growth. New numbers from the Office for National Statistics (ONS) give a range of views on the <a href="https://www.cryptopolitan.com/uk-to-release-crypto-legislation-in-6-months/" data-type="post" data-id="468852">UK’s</a> economy right now. Even though wage growth has been improving and inflation has been going down, the fact that the economy has been shrinking since early 2022 makes it less likely that there will be a strong recovery.</p> 
<p>In particular, the job market paints a complicated picture. The ONS’s most recent report on the job market shows that wage growth has slowed, but it is still high compared to the past. For the first time since before the cost of living crisis, real wage growth turned positive. This could be a sign of a turning point.</p> 
<p>As always, inflation is a key factor in understanding the UK’s economic situation. The annual UK CPI inflation rate stayed the same at 4% in January, even though everyone thought it would go up. This means that prices may start to go down in the coming months. But the fact that services inflation is still high, which is a sign of price pressures in the UK, suggests that there are underlying inflationary risks that could make it harder for the Bank of England to decide on interest rates.</p>

Inflation anxiety weighs on UK consumers’ confidence

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