Consumer confidence dipped in September, as the prospect of further tax rises in the forthcoming Budget, which is now set for November, shook shopper sentiment and prompted a gloomier outlook.

GfK’s Consumer Confidence Index dropped to -19 in September, a two index point fall compared to the month before.

GfK said the outlook worsened across the board, with all five of its index measurement pillars dipping last month, suggesting the August interest rate cut had done little to improve the mood of shoppers.

Interest rate cuts fails to lift consumer mood

“The August decrease in interest rates does not appear to have provided any obvious boost to the financial mood of consumers or drawn attention away from day-to-day cost issues,” said Neil Bellamy, Consumer Insights Director at GfK.

Shoppers showed a growing nervousness around making big ticket purchases, with GfK’s Major Purchase Index down -3 points to -16, but +7 index points higher than September 2024. Meanwhile, consumers’ saving intentions also fell by a “striking” -8 points month-on-month.

More broadly, the economic outlook was also lacklustre. “Looking at the economy, sentiment is sliding sharply,” added Bellamy. “In June 2024, our forward-looking measure stood at -11, but just 15 months later it has slumped to minus -32.”

Budget tax fears prompt gloomy outlook

This downbeat outlook was mirrored in separate data from the British Retail Consortium (BRC), also released today.

According to BRC-Opinium data, consumer expectations for the state of the economy over the next three months worsened to -36 in September, down by -4 points since August. Plans for personal saving also fell to 0 last month, down -2 points month-on-month.

However, shopper intentions on retail spend defied this trend, rising +1 point compared to the month before.

“Worries about the Budget, combined with the increase in the cost of living, have eroded confidence, with little sign that inflation will come down soon,” Helen Dickinson, Chief Executive of the BRC, said. “All eyes are now firmly locked on the 26 November and what the Chancellor will announce.”

“With tax rises expected in the November budget, the risk is that confidence inevitably falls,” Bellamy added.