Consumer confidence has fallen again according to the latest figures from Nationwide published just ahead of tomorrows meeting of the Bank of England's, Monetary Policy Committee (MPC).
The lender’s Consumer Confidence Index fell by 4 points to 94 in February, and is 16 points down on a year ago.
Nationwide claims individuals are taking an increasingly pessimistic view of the economy and labour market. The main Nationwide Consumer Confidence Index fell from 98 to 94 in February and is now sitting just above its all time low of 92 seen in October 2005. This is also the first time the main index and the three supporting indices have all shown falls since the index began in May 2004. In addition to the monthly falls, all but the Spending Index are now below their 3 month average levels. Crucially this may be the one indicator the MPC looks to when it meets tomorrow, to discuss whether interst rates should be maintained at their current level.
Stuart Bernau, Nationwide's executive director, says the latest figures present a difficult view of the UK economy with bad news on jobs, retail sales, rising fuel and energy prices all combining to undermine consumer confidence. With many facing Council Tax rises and uncertainty on the high stree, he says,t the outlook is gloomy.
Bernau says: “Unemployment is at its highest rate for three years and with more job losses being announced, the gloom could continue into the Spring. The prospect of a weaker economic recovery will present a challenge to the Bank of England's Monetary Policy Committee when it meets to review interest rates this week, and to Gordon Brown as he prepares for the 2006 Budget."
Following a brief pick up in retail sales over the Christmas period, performance was then weak in January casting significant doubt on the Bank of England’s expectation of strong consumer spending in 2006.
Nationwide says the Bank is therefore likely to monitor high street performance particularly closely in the coming months. In recent months have seen consumers' take a volatile attitude to making large purchases. After a rise in January, the Nationwide’s index fell 8 points in February suggesting the official February retail sales data is likely to be subdued, putting further downward pressure on the economy.
Meanwhile, optimism about house prices fell for the second consecutive month in February, with the continued decline suggesting the housing market may be beginning to stabilise. Consumers now expect house prices to rise 2.4% over the coming six months, says Nationwide, down from 2.6% in January, bringing consumers' predictions more in line with the lender’s own forecast of a 0-3% change over the year.
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