8th August 2026
The constant stream of bad economic news may be influencing how people feel about spending — even when the underlying picture is not quite as gloomy as the headlines suggest.
Every month brings another inflation announcement.
Inflation is up.
Inflation is down.
Prices are rising faster than expected.
Prices are rising more slowly.
Households are under pressure.
Consumer confidence has fallen.
For people trying to understand what is happening to the economy, it can sometimes feel as though the UK is permanently stuck in a cost-of-living crisis.
But there is an interesting question that deserves more attention:
Could the continual reporting of economic bad news itself be influencing how people behave?
The answer is probably yes although that does not mean the problems are imaginary.
People see prices for themselves
There is an important distinction between being influenced by the news and being misled by it.
People do not need a television economist to tell them that food is expensive.
They see the supermarket bill.
They know what it costs to fill the car.
They see their insurance renewal.
They receive their electricity bill.
They know how much their mortgage or rent costs.
That is why official inflation statistics can sometimes appear disconnected from public experience.
The latest ONS figures showed CPI inflation falling to 2.6% in June, from 2.8% in May. That is undoubtedly better than the much higher rates experienced during the inflation shock.
But nobody goes into a supermarket and buys a basket of goods at "2.6% inflation".
They buy individual products at today's prices.
And those prices are generally still much higher than they were several years ago.
The danger of the inflation headline
This creates a psychological problem.
Imagine somebody hears that inflation has fallen again.
They might reasonably think:
"That's good. Things are getting cheaper."
But that is not what the statistic means.
It means prices are increasing more slowly.
That distinction is obvious to economists but much less obvious in everyday conversation.
And there is another complication.
If somebody has already experienced several years of substantial price increases, they may continue to feel financially squeezed even when inflation has returned close to what would historically have been considered a more normal level.
The price level has changed.
The inflation rate is simply telling us how quickly it is changing now.
We may be suffering from "inflation memory"
People remember prices remarkably well when those prices affect their household budgets.
They remember what their weekly shopping used to cost.
They remember petrol at a particular price.
They remember mortgage rates.
They remember the cost of a holiday, a takeaway or a meal out.
That creates what might be called inflation memory.
Even when inflation falls, the memory of previous price increases remains.
This matters because consumer confidence is not determined entirely by the latest economic statistics.
It is also influenced by how people feel about their financial position and what they expect to happen next.
If people constantly hear that the economy is struggling, inflation is a problem, businesses are cutting jobs and households are under pressure, they may become more cautious.
They might postpone replacing the car.
Put off a home improvement.
Reduce restaurant visits.
Cancel a holiday.
Or simply put more money into savings rather than spending it.
And that behaviour can become self-fulfilling
This is where the story becomes particularly interesting.
Consumer spending is an enormous part of the British economy.
If people become convinced that difficult times are coming, they can change their behaviour before their own financial circumstances actually deteriorate.
One household doing this makes little difference.
Millions doing it can matter considerably.
Businesses see fewer customers.
Retailers reduce orders.
Restaurants have quieter evenings.
Employers become more cautious about recruitment.
Investment decisions are delayed.
And the economy can weaken.
In other words, confidence can become an economic force in its own right.
The Bank of England's latest business intelligence illustrates the problem. Its July Agents' summary reported subdued growth and said that the erosion of sentiment in recent months meant that even a return of confidence would translate only gradually into stronger activity.
But are people really being talked into being pessimistic?
There is another side to the argument.
It would be unfair to suggest that consumers are simply being manipulated by headlines.
People have genuine reasons to be cautious.
The ONS found that 89% of adults in Great Britain regarded the cost of living as an important issue in May. Among those who said their cost of living had increased, food shopping, fuel and energy bills were the most commonly cited reasons.
Those are not abstract economic statistics.
They are household expenses.
And there is evidence that people remain financially stretched even though the inflation rate has fallen dramatically from its earlier peak.
So the public's pessimism cannot simply be blamed on newspapers, television or social media.
But the headlines can amplify the problem
The issue is perhaps not that the media reports bad news.
Bad economic news should be reported.
The problem is that bad news is often much more attention-grabbing than gradual improvement.
"Inflation falls slightly" is unlikely to attract the same attention as:
"Households face another cost-of-living squeeze."
"Consumer spending remains resilient" is less dramatic than:
"Britain faces economic uncertainty."
And "prices are rising more slowly" does not sound nearly as reassuring as it should because many people understandably interpret it as meaning that prices are still going up.
The result can be an economy in which the public simultaneously says that times are terrible and continues to spend.
That apparent contradiction is worth examining.
People may be more resilient than the headlines suggest
There is a danger of confusing pessimism with actual financial behaviour.
People can say they are worried while still going out for a meal.
They can complain about the cost of living while booking a holiday.
They can be concerned about the economy while buying a new television or replacing an ageing car.
That does not necessarily mean they are being irrational.
It may simply mean that households have adapted.
Wages have risen.
Pensions have increased.
Some households have savings.
Others have paid down debt.
And people make choices about what they consider important.
They may cut back in one area while continuing to spend in another.
This is why consumer confidence surveys and actual consumer spending can sometimes tell rather different stories.
The real test is what happens next
There is a particularly important question for the UK economy.
Have households become permanently more cautious, or are they simply waiting for confidence to return?
If people believe inflation is under control, wages are catching up and interest rates are becoming less restrictive, they may eventually become more willing to spend.
That could provide an important boost to businesses.
The latest Bank of England Decision Maker Panel survey provides some encouragement: businesses' expectations for CPI inflation one year ahead fell to 3.4% in July from 3.7% in June, while three-year expectations eased to 2.8%.
That suggests expectations are not spiralling out of control.
But expectations matter enormously.
If households believe tomorrow will be worse than today, they behave differently from households that believe their financial position will gradually improve.
Perhaps we need better economic language
One lesson from the inflation experience is that economic terminology does not always translate well into everyday life.
"Inflation is falling" sounds like prices are falling.
"Inflation is stable" can sound like prices are stable.
Neither is necessarily true.
Perhaps economic reporting should routinely explain the difference.
Instead of simply saying:
"Inflation falls to 2.6%"
it could say:
"Prices are still rising, but they are rising more slowly."
That one sentence could make the statistics considerably easier to understand.
The cost-of-living crisis may be changing into something different
Britain may now be moving into a different phase of the inflation story.
The crisis of rapidly accelerating prices may be easing.
But the crisis of affordability has not necessarily disappeared.
People are now living with a permanently higher price base.
That means the next economic challenge is not simply getting inflation down.
It is allowing incomes, savings and living standards to catch up with the higher cost of everyday life.
And perhaps there is one final point worth considering.
The British public may actually be more realistic than the constant stream of economic headlines gives it credit for.
People know when something is genuinely unaffordable.
They also know when they can afford something.
They see their own bank balance.
They see their supermarket receipt.
They see the price on the petrol pump.
They make their own decisions.
The danger is that if we constantly tell people that the economy is in crisis, we should not be surprised if they start behaving as though it is.
And if enough people do that, pessimism itself can become another economic problem.