London, United Kingdom (AHN) – Consumer confidence in the United Kingdom suffered its largest monthly drop 16 years, plunging eight points during the December to January period to -29.
Officials say that in the 35 years since the index began, consumer confidence has only dropped that much in a month on six occasions. The last time the index plunged this month was in the November to December index in 1994.
Although all measures of the December to January index dropped, the rising value added tax (VAT) was blamed for much of the drop in consumer confidence, the GfK NOP Social Research report said.
Increasing the VAT was the first of the consumer austerity measures to impose an economic hardship on consumers. The government increased standard VAT rates from 17.5 percent to 20 percent at the beginning of the month.
The subsequent contraction in the economy was severe enough that talk of a double dip recession is not avoidable, the report added.
GfK noted that the VAT caused a big drop in large purchases.
People’s expectations for their own financial situation over the next year also plunged, dropping to -12 down from +4 a year ago. People’s expectation for the general economy over the next year plummeted to -30 from -2 a year ago.
This news is on top of earlier economic reports that revealed the UK real gross domestic product dropped by 0.5 percent in the final three months of 2010 and the rate of CPI inflation rose by 3.7 percent.
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