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British consumers have entered 2007 in downbeat fashion, with Nationwide claiming that people are pessimistic over the country's economic outlook.

The building society's monthly consumer confidence index for December reveals that overall optimism has returned to its all-time low.

One of the main sources for concern is the country's faltering employment situation, with more than a third of respondents predicting there will be fewer jobs available in six months' time.

Nationwide itself suggests that two interest rate increases in the latter half of 2006 may be "starting to hit home", with consumers significantly less happy at the close of the last year than the beginning.

However, 85 per cent of people still believe their household incomes will improve or at least remain the same over the half-year.

Fionnuala Earley, the building society's group economist, today commented: "Consumers were much less happy at the end of 2006 than at the start of the year and don't look too confident about the future."

According to Nationwide, there is a 90 per cent chance that the Bank of England's monetary policy committee (MPC) will maintain interest rates at five per cent later this week, with Ms Earley adding: "The subdued view of the labour market may be some comfort to the MPC, perhaps indicating that wage demands will remain modest as the current round of wage negotiations continues.

"The committee may also be encouraged by the seeming reluctance of consumers to go out and spend. If this holds true in the sales season, the chance of a further hike in rates falls."