Iran war 'continues to stoke consumer anxiety' amid inflation gloom
War in the Middle East ‘continues to stoke consumer anxiety’ as household confidence in the economy languishes at record lows.The longer the conflict continues, the more ‘uncertainty’ there is in the economy, the British Retail Consortium (BRC) warned, as households brace for energy and grocery price hikes.It comes as inflation leapt to 3.3 per cent last month, up from 3 per cent in February, as soaring oil prices caused by the war sent motor fuel prices climbing at the fastest pace in four years.Consumer expectations for the state of the economy over the next three months remained at the same level this month as in March, which was the lowest on record, according to BRC-Opinium data.And their prospects for their personal financial situation worsened this month, from -17 to -21, the lowest on record. Pressure on households: Consumers are bracing for price hikes, says the BRC Shoppers have already seen their petrol and diesel costs skyrocket since the outbreak of the war in late February.And experts say that further price rises will filter through the system to the tills in the coming months as supply chains continue to wrestle with higher costs and disruption.Businesses ranging from Durex maker Reckitt to yoghurt company Danone have already signalled price rises on the horizon.Supermarket bosses are also calling on the Government to help food manufacturers with their energy bills to help tame food price rises.It comes as retailers are already grappling with soaring taxes and rising costs, including increases to National Insurance contributions and wages.BRC chief executive, Helen Dickinson, said: ‘The Middle East conflict continues to stoke consumer anxiety around inflation and the cost of living. Amid a volatile geopolitical situation, households are expecting to see their pay packets squeezed by rising petrol, domestic energy, and food prices.’She added: ‘The longer volatility drags on, the more uncertainty it creates in the economy. Businesses are battered by higher energy costs while also grappling with the growing burden of domestic policy pressures.’The BRC has called on the Government to reconsider new packaging taxes and the upcoming employment rights legislation to help limit inflation. ‘Taking early, decisive action would help shield consumers from a spike in the cost of living they simply can’t afford,’ Dickinson added.A fresh cost-of-living squeeze has dashed previous hopes that inflation would slide to 2 per cent this spring.The fallout from the conflict is also expected to result in a dramatic slowdown in economic growth, with the International Monetary Fund predicting Britain will be the worst affected of any major advanced nation.Consumers are planning to spend less on ‘nice to haves’ as they prepare for higher costs of essentials, according to another survey of consumers, this time by RSM.The top three areas shoppers plan to fork out more for in the next three months include groceries, energy bills and using a car.Robyn Duffy, consumer markets senior analyst at RSM UK, said: ‘As incomes get squeezed and consumers chip away at their savings to support essential spending, this will likely result in many pulling back on discretionary spending and ‘nice to haves’, hitting consumer-facing businesses the hardest.‘The unusually high levels of savings could help to smooth the impact of higher costs in the near-term. However, households tend to prioritise rebuilding savings in the aftermath of a shock, so spending may remain subdued for a prolonged period, particularly if we see interest rates go up.’DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you
Share or comment on this article:
Iran war 'continues to stoke consumer anxiety' amid inflation gloom
