LONDON - Consumer confidence in Britain has plummeted since the Iran war broke out, as a surge in energy prices began to dispel hopes of falling inflation. The Guardian quoted Thursday, March 26 reported, the effective closure of the Strait of Hormuz and attacks on infrastructure in the region triggered new concerns about prices, economic growth, and household spending.
A survey by the British Retail Consortium (BRC) showed that 64 percent of respondents expected the British economy to worsen in the next three months. Only 11 percent assessed that conditions would improve. The net balance fell to minus 53 percent, from minus 20 percent a month earlier.
The pressure is also felt at the household level. The Opinium survey for BRC on March 10-13 recorded views on personal financial conditions falling to minus 17 percent, from minus 6 percent in February.
BRC Chief Executive Helen Dickinson said consumer confidence collapsed as conflicts in the Middle East revived the threat of inflation. The rise in global energy prices, she said, came as businesses and families were just starting to see an opportunity for price pressures to ease. "Just as the economy is starting to turn a corner from inflationary pressures, the global energy price hike is very undesirable for businesses and families," she said as quoted by The Guardian.
Analysts are now cutting their forecasts for Britain's growth to 2026. The concern is that already rising energy prices at the pump could make consumers hold back on other spending.
This pressure comes after British inflation was recorded at 3 percent in February. Previously, the Bank of England had predicted that inflation would return to the 2 percent target in the spring and pave the way for a rate cut. However, last week's monetary policy meeting actually held interest rates and signaled that the next step could lead to an increase.
Data from the UK's Office for National Statistics, as reported by The Guardian, also shows a picture that is not entirely uniform. The rise in clothing prices was the main driver of February's inflation, but it was still held back by falling gasoline prices. ONS chief economist Grant Fitzner explained that the gasoline data was collected before the conflict in the Middle East broke out and before crude oil prices soared.
Therefore, the next pressure is expected to be more clearly visible in the next data. RAC noted that the price of unleaded gasoline has risen by 12 pence per liter, or 9 percent, since the war began.
The same threat is now spreading to food. The British Food and Drink Federation warns that the current slowdown in food price inflation could be a short respite. The longer the conflict lasts, the greater the pressure from energy costs, bunker fuel, and fertilizer.
Amid this situation, Finance Minister Rachel Reeves said the government was preparing an emergency plan if necessary to intervene to protect consumers from rising energy prices at the end of the year. However, if assistance is provided, it will be focused on the households that need it most, not for all energy customers.
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