British consumers’ confidence remained stuck at a record low this month in the face of surging inflation and higher interest rates, a survey showed on Friday.

Market research firm GfK said its consumer morale index held at -41 in July, matching June’s 48-year low and below levels that have previously preceded recessions.

Economists polled by Reuters had expected the index to edge down to -42.

Joe Staton, client strategy director at GfK, said a two-point rise in hopes for personal finances over the next 12 months might reflect optimism after Prime Minister Boris Johnson said he would resign.

But the overall index reflected acute concerns about the general economic situation.

With inflation heading for double digits from more than 9% in June, the Bank of England is expected to raise interest rates for the sixth time since December next month, despite a slowing economy. It says it is prepared to act “forcefully” if needed.

Meanwhile, Britain’s businesses grew at their slowest pace in 17 months in July and inflation pressures eased, according to an industry survey that might reduce pressure on the Bank of England to deliver a bigger-than-usual interest rate hike next month.

The preliminary version of the S&P Global’s Purchasing Managers’ Index (PMI), covering services and manufacturing firms, fell to 52.8 - the lowest since February 2021 - from June’s 53.7.

Output among factories contracted for the first time since May 2020 but travel and leisure firms saw stronger new orders, according to the survey which was released on Friday.

The slowdown was mostly due to weaker demand but continued shortages of supplies and staff also put a break on growth.

The PMI also showed input cost inflation at a 10-month low - or an 18-month low for manufacturers - welcome news for the BoE. The central bank says it is ready to raise interest rates by a bigger-than-usual half-percentage point if it sees signs of persistent inflation pressures.

The fall was due to weaker commodity prices and a stabilisation in fuel costs although many firms reported intense salary pressures and some said the pound’s fall against the US dollar was also hurting them.

Prices charged by firms rose at the slowest pace since January as demand from clients softened.

Companies remained cautious about the outlook although their mood improved from June’s 25-month low, driven by service firms. Employment rose at the slowest pace in 16 months.

Separately, British retail sales volumes fell by a smaller-than-expected 0.1% in June from May, the Office for National Statistics said on Friday, but the trend remained weak as households struggle with surging inflation. Economists polled by Reuters had expected a 0.3% monthly fall in retail sales.

“After taking account of rising prices, retail sales fell slightly in June and although they remain above their pre-pandemic level, the broader trend is one of decline,” Heather Bovill, an ONS statistician, said.

A monthly fall in May was estimated to have been more severe than originally thought, showing a drop of 0.8% from April compared with an initially reported decline of 0.5%.

Excluding automotive fuel, which has soared in price and taken a bigger chunk out of household budgets, sales volumes rose by 0.4% on the month, defying the poll forecast for a fall of 0.4%.

The pound fell against the dollar on Friday as fresh data fuelled worries about a slowdown in a UK economy that is grappling with inflation at a four-decade high.

Sterling fell 0.4% to $1.1961 but remained above the 28-month low hit last week. And it was set to end the week 0.75% higher - its biggest weekly rise since late May.

The pound rose as much as 0.34% to 84.93 pence per euro, recovering from just over two-week lows touched on Thursday after a larger-than-expected rate hike from the European Central Bank boosted the euro.

“If you’re looking at sterling, you want to watch how the situation with spreads pans out,” said Stephen Gallo, European Head of FX strategy at BMO Capital Markets.

With Italian bonds underperforming the rest of Europe, that is likely to put a ceiling of around 86 pence on the euro/sterling spread, according to Gallo.

The Bank of England is also tasked with the tricky objective of taming surging prices while avoiding a harsh economic downturn. Surging petrol and food prices last month pushed British inflation to its highest rate in 40 years.