About 2,000 people were surveyed in the period from 1 to 14 February. The GfK survey results showed that the consumer confidence index plunged to -26 in February from the previous month's reading of -19. The index hit the lowest level since last January when the British economy suffered from a harsh lockdown.
"Fear about the impact of price rises from food to fuel and utilities, increased taxation and interest rate hikes has created a perfect storm of worries that has shaken consumer confidence", Joe Staton, the GfK client strategy director said.
The worst sentiment of 2022 was noted in relation to personal finance and a broader economic situation.
"There's clear anxiety in these findings as many consumers worry about balancing the household books at the end of the month without going further into debt", Mr. Staton added. He also noted that the UK economic growth may slow down due to the slowing consumer spending.
However, there is room for further declines in consumer confidence. Analysts forecast that the inflation rate rise above 7% in April. It would be the highest rate in the last 30 years. The jump is likely to be caused by a 2-fold increase in domestic energy prices. Besides, experts anticipate a rise in social security contributions.
The Bank of England has already raised its benchmark rate twice since December. Financial analysts expect further hikes to 0.75% in March despite the fact that the central bank forecasts an economic slowdown.
Prime Minister Boris Johnson's government has announced some measures to cushion the blow from higher electricity rates. However, it refused to halt increases in national insurance premiums, saying this measure is necessary to pay for UK health and social services.
The GfK indicator reflecting consumers' readiness to make big purchases declined five points to -15.
Apparently, the Bank of England will be forced to hike the rates again due to rising tensions amid the Russia-Ukraine conflict.
At the time of writing, the pound was trading higher against the US dollar, but the discouraging news may change the trend.