Households across the UK are primarily concerned with rising prices, a new survey has concluded. The survey, from S&P Global, found households have become increasingly gloomy about their financial situation. The data shows that its consumer sentiment index figure dropped to 42.1 in May, from 42.3 in April.
Inflation Worries Take Centre Stage
Maryam Baluch, an economist at S&P Global Market Intelligence, said: 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.
Of the 1,500 people surveyed, 51 per cent anticipate a rise in interest rates. Baluch added: 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.
Sterling Under Pressure
The Pound is also down around 1.5 per cent across the board, with the US Dollar now sitting at a five-week low of near 1.3360 and the Euro back in the 1.14 region, a three-week low. Speaking to Newspage, Prem Raja, Head of Trading Floor at Currencies 4 You, said: Sterling is under real pressure, down around 1.5% across the board, with the US Dollar now sitting near 1.3360 and the Euro back in the 1.14 region.
For UK businesses buying in Euros or Dollars, that move can hit margins very quickly, especially where costs are fixed and pricing cannot easily be passed on. The key is not trying to guess the perfect moment, but having a strategy. Forward contracts, market orders and staged buying can help businesses protect budgets and avoid being forced to buy currency during sharp moves. Too many still leave it until the invoice is due, then panic when the market has already moved.
We have seen a noticeable increase in concern from businesses recently, particularly importers exposed to the Dollar and Euro. Right now, the market is not really pricing in further Bank of England hikes, more just rates staying higher for longer. Whilst a hike would normally be Sterling positive, concerns around weak GDP growth and political uncertainty are counteracting that support.
