UK — S&P Global's consumer sentiment index for the United Kingdom fell to 42.1 in May from 42.3 in April, the lowest level since July 2023. The data intelligence company's survey identified rising prices as the top financial concern for UK households.

The index tracks how people feel about their household spending, financial wellbeing, savings, debt and employment. The survey of 1,500 people showed that 51% anticipate a rise in interest rates, the highest proportion in two and a half years. Job insecurity reached its highest level since March 2023, and attitudes towards big purchases were among the lowest in almost three years.

Household savings in May fell at the fastest pace since July 2023, a period when UK inflation was soaring following the Russian invasion of Ukraine. High energy prices and related costs have strained household budgets.

"Inflation worries have firmly taken centre stage. The rising cost of living is eating into savings at a rate not seen since 2011 if the pandemic is excluded, and is causing concern over future finances, in part due to growing conviction that interest rates are soon going to start rising." said Maryam Baluch, economist at S&P Global Market Intelligence.

Baluch said that aside from the periods of the Covid pandemic and the Ukraine-related energy price rise, the consumer sentiment index score has not been this low since 2012. That reference to 2012 predates the July 2023 low and the 2011 savings comparison in her quote, placing the current reading in a broader historical context spanning more than a decade.

"Not surprisingly, this environment of squeezed finances, worries of higher interest rates and job insecurity is deterring spending to a degree rarely witnessed by the survey, which in turn looks set to dampen economic growth," she said.

The Office for National Statistics showed the rate of UK inflation, as measured by the consumer prices index, rose to 3.3% in March, up from 3.0% in February. The official inflation rate for April is expected to decline to 3% and remain above the Bank of England's 2% target.

Rate-setters at the Bank of England have suggested they will probably need to raise the cost of borrowing at some point this year if global oil prices remain high and push up inflation. The Bank of England has warned that typical energy bills are likely to rise 16% to £1,900 by the summer, and that food prices will rise 7% by the end of the year.