UK consumer sentiment falls as appetite for debt grows - survey

(Sharecast News) - UK consumer sentiment hit a two-month low in June amid worries about inflation eroding purchasing power and an increasing appetite for debt by households, according to a survey published on Monday. The S&P consumer sentiment index for June fell to 45 from 45.2 in May, while the spending sentiment index declined to 37.4 from 38.2 and a read out on job security slipped below 50 to 49.2.

Readings below 50 indicate a deterioration in confidence.

"As the middle of the year approaches, pessimism among UK households shows no signs of improving, with consumer sentiment remaining firmly in negative territory," said Maryam Baluch, economist at S&P Global Market Intelligence.

"Concerns about making ends meet have intensified due to high prices and job insecurity ... which will limit willingness to spend and instead encourage greater financial caution, dampening economic growth."

As a result consumers were stalling major purchases as they prioritised essentials over discretionary spending, the survey found.

"Debt levels have meanwhile risen again as households increasingly seek to borrow, primarily for daily needs, while interest in larger purchases has dwindled further," Baluch added, although many were finding it harder to access credit.

"With the Bank of England having sat on its hands at its June policy meeting, these disappointing consumer sentiment data will likely help encourage an interest rate cut at the next gathering in August, especially as there are few indications here that any inflationary pressures will become entrenched while households remain so cautious in relation to spending."

Reporting by Frank Prenesti for Sharecast.com