A combination of global developments and monetary intervention has knocked UK consumer confidence down to its lowest level on record, the latest Nationwide consumer confidence index reveals.
The index itself fell to 83, 17 points lower than August last year. The drop in confidence ends a three-month run in which it remained low but stable on 94 points.
Nationwide claims that destabilising news of Israel's conflict with Lebanese militant group Hizbullah had a damaging impact on the public's confidence, while the disruptions caused by the apparent foiling of a transatlantic terror plot also had an undermining effect.
But it cites the Bank of England's decision to raise interest rates for the first time in 12 months as being the primary factory driving consumer confidence lower, reducing the expectations index governing people's views about future prospects by an enormous 16-point drop to just 81.
"The Bank of England's decision to increase [the] base rate clearly had a dramatic impact on consumer confidence and people's reactions over the coming weeks will be crucial," Stuart Bernau, Nationwide's economic director, said.
"If confidence fails to bounce back, the impact on many areas of the economy could be severe. The coming months will prove to be telling as they will show whether confidence can recover at a time when consumers' pockets begin to feel the real effect of the rate change."
The public believes house prices are less likely to rise following the Bank's interest rate decision, according to the Nationwide research. Meanwhile just 44 per cent of people believe that a wide range of jobs are available, a fall of nine per cent on last month's figures.
Today's gloomy prognosis for the future reflects the uncertainty highlighted in yesterday's retail sales update from the British Retail Consortium (BRC), which showed a stuttering improvement in sales growth influenced by unpredictable short-term factors.