UK shoppers lose confidence as cost pressures threaten spending plans

British consumers have suddenly become rather less keen to splash the cash. The GfK consumer confidence index fell by 11 points to −24 in October, its sharpest monthly decline since the Covid pandemic. Confidence in the wider economy over the next year plunged by 14 points to −36, while the major purchase index also dropped by 14 points to −22. Rising inflation, now at 3.5%, and the economic fallout from conflict in the Middle East are squeezing household budgets. With energy costs looming and the government’s Budget approaching, shoppers may be thinking twice before opening their wallets.

UK consumer confidence falls at fastest rate since Brexit vote as cost of living bites | Consumer spending | The Guardian

1. Explain how the GfK consumer confidence index is measured.

2. Analyse how a fall in consumer confidence could affect aggregate demand and economic growth in the UK.

3. Evaluate whether a fall in consumer confidence will necessarily lead to a significant decrease in household consumption.