Iran conflict sends ‘ripple of fear’ through consumer confidence

GfK’s index of household sentiment dropped to minus 21 in March from minus 19 in the previous month. This is the weakest reading since April last year.

The data showed that the decline was driven by a six-point drop to minus 37 in expectations for the UK economy over the coming year. There was also a six-point rise in the savings index to plus 27 over the last month.

Neil Bellamy, Consumer Insights Director at GfK, an NIQ Company, said  “A ripple of fear is spreading as is evident from the six-point fall in perceptions of the General Economic Situation over the next 12 months, and also in the four-point drop in the Major Purchase Index. People simply do not feel the economy is robust enough to ride out the knock-on effects from the Middle East conflict. Moreover, the decline in purchasing intentions, coupled with a six-point rise in the Savings Index, indicates people are holding on to their money and avoiding making major purchases while they wait to see what the medium-term impact of the conflict will be.

“There are two major concerns for the future. First, the UK will need to adopt a careful and balanced response to the wider volatility we have seen since the end of February. Second, with growing concerns over further sharp price rises in the coming months, unless there’s a swift resolution to the conflict, or government schemes such as additional support with energy bills come into fruition, this ripple of fear we are seeing in the March data has the danger of turning into a flood.”