KPMG UK recently issued major updates that paint a cautious picture for households and businesses: Consumer confidence has weakened sharply, and KPMG’s chief economist warned that inflation could accelerate again if energy shocks persist. KPMG’s quarterly Consumer Pulse report found a clear deterioration in the way people view products, based on an online survey of 3,000 UK adults conducted between 5-16 March. economy.
Six in ten respondents (62%) said: economy It’s getting worse, down from 58% in the previous quarter, but only about one in ten (10%) believe it’s getting better.
questionnaire It underscores a trend among consumers towards greater caution as uncertainty increases. kpmg.com
Rising daily costs are at the heart of this pessimism.
An overwhelming majority cited grocery prices (85%) and household utility bills (84%) as the primary reasons for their negative outlook.
Concerns about utilities rose nine percentage points from the previous quarter to become the top concern for people ages 25 to 54.
As a result, many households already own behaviour: About half of those who think the economy is worsening report they are cutting back on spending, and 40% say they are postponing big-ticket purchases; This rate was 34% compared to three months ago.
Despite gloomy macro outlooks, daily spending remains resilient.
Price is now the most important factor shaping everyday purchasing decisions (71%), encouraging consumers to place greater reliance on loyalty programs, own-brand products and lower-cost retailers.
Spending on dining out and takeaways increased in the first quarter, and holidays remain the most common big-ticket purchase among spenders.
Yet nearly half of respondents haven’t made any significant discretionary purchases so far in 2026; This underscores a cautious approach to larger acquisitions spending decisions.
KPMG’s consumer team notes that while routine spending continues, larger discretionary spending on experiences is being prioritized and remains vulnerable to rising costs.
Regarding inflation, Yael SelfinKPMG UK Deputy Chairman and Chief Economist has warned that energy supply disruptions pose an upside risk in the near term.
Official data showed inflation remained steady at 3.0% in February; KPMG He expects it to ease modestly around 2.5% in April.
However, Selfin warned that inflation could pick up later in the year and potentially fall below 4% if energy supply problems persist.
Businesses are already facing higher challenges energy The costs and risk exposure to households in being able to pass them on to consumers will depend on how government support and billing cycles evolve.
Selfin also said the Bank of England faces a high bar that needs to be raised interest rates Once again: Weakening labor market signals and broader economic softness should limit the economy’s consolidation. inflation It is possible.
If geopolitical tensions diminish rapidly, Bank of England It may leave interest rates unchanged for much of the first half of the year and consider starting to ease policy around November.
Taken together, KPMG’s findings It reveals a divided picture: Consumers are maintaining their daily spending but cutting back on larger purchases as cost pressures rise; Economists warn energy-related inflation risks could complicate the recovery outlook for the rest of the year 2026.
