Consumer confidence slumps

05-12-2007

Consumer confidence slumps
Consumer confidence fell at the fastest rate in more than three years in November, new research has revealed.

Lender Nationwide said its main consumer confidence index fell by 12 points to 86 last month – the largest single monthly fall recorded since the index was launched in May 2004.

The slump in consumer confidence was not unexpected given current economic concerns, the company stressed.

Nationwide chief economist Fionnuala Earley said: "Uncertainty about the effects of the credit crunch together with rising oil and food prices seem to be affecting feelings about jobs and the future economic situation.

"With this in mind, it is natural that consumers would think about tightening their belts this Christmas and this is reflected in the weaker spending index," she added.

All four of Nationwide's confidence indices fell in November, with the spending index – a measure of consumer's willingness to part with their cash – dropping 14 points to 63.

The expectations index, which rates how consumers feel about the outlook for the economy and jobs in six months time, also fell by 14 points to 83.

Confidence about the current economic and employment situation also weakened last month, with Nationwide's present situation index dropping back eight points.

Expectations of house price growth have also fallen, with consumers now anticipating a rise of just 1.2 per cent in property prices over the next six months – down from 1.9 per cent in October.

Looking ahead, Nationwide said the expectation of at least two cuts in interest rates next year was likely to begin taking the pressure off people's personal finances and restoring some confidence on the high street.

However reports suggest the sharp fall in consumer confidence recorded last month will add pressure on Bank of England policymakers to reduce the UK's benchmark interest rate from its current level of 5.75 per cent this week.

The decision of the Bank's monetary policy committee (MPC) will be announced on Thursday.

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