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News: Consumer confidence plummets

Wed, 09 Jan 08

Consumer confidence fell for the third month in a row during December despite a reduction in interest rates...

Nationwide’s consumer confidence index fell by one point during the month to 85 - its lowest level since February last year. The drop came despite the Bank of England knocking a quarter percent off the cost of borrowing and cutting the interest rate to 5.5%, to provide some relief for hard pressed homeowners.

But ongoing economic uncertainty and the impact of higher food and petrol prices continued to take their toll on people's confidence. Consumers felt particularly pessimistic about the current economic and employment situation, with this index dropping by three points to 88 on the back of concerns about the economy.

People's sentiment about the economy and employment in six months time remained unchanged, but this apparent stability masked concerns about the economic outlook. Around 42% of people think the UK's economic situation will be worse in six months time than it is now.

Job market confidence

But despite this people remain confident about the jobs market, with the number of people who feel positive about the future employment situation jumping by nearly 10% year-on-year to 44%. Nearly nine out of 10 people also think their household income will be either the same or higher in six months' time.

"Another weak month for consumer confidence is not surprising given current economic conditions," said Nationwide's Fionnuala Earley. "Continued uncertainty about the future path of the economy along with a weakening housing market was bound to affect consumer sentiment.

"Further rate cuts expected in the first quarter of 2008 may help to improve matters, but it is likely to be a few months before consumer confidence recovers to levels seen earlier this year."

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