Consumer confidence in the current economic situation has fallen to its lowest ever level, claims Nationwide.
In its latest Consumer Confidence Index, in conjunction with TNS, Nationwide says overall confidence appears to be stabilising as it remains unchanged at 94 points, just one point lower than last year.
However it says people are being particularly gloomy about the current state of the economy and the employment situation, causing the index to fall to 89, which is in stark contrast to Spring 2005 when consumers were more upbeat about the situation.
Although only around 38% are positive about the economy, Nationwide says there has been a modest increase in the number of people positive about the employment situation, which it suggests may reflect the fact there has been less news of job losses in recent weeks.
As a result consumers seem to be slightly more positive about the future, with the Expectations Index, which measures the public view of the economy, employment and household income in six months time, the only index to rise in June, with an increase of two points to 98.
However the Spending Index dropped for the second month in a row, and is now standing at 95, 18 points below its recent high in January. Consumers falling confidence has been reflected by retailers, with many reporting difficult trading conditions over recent weeks.
Retailers claim as consumers face higher living costs, such as utility and council tax bills, they have begun to show more caution on the high street. Although Nationwide points out official data suggests there has been a modest return of consumers to the high street over the past few months, as they’ve been encouraged by off season sales.
Nationwide also reveals house price expectations have fallen in the last month, with consumers expecting prices to rise 2.7% over the next six months, down from 2.8% in May, even though prices are currently increasing at an annual rate of 5%.
Stuart Bernau, executive director of Nationwide, says consumer confidence has been depressed for a number of months because people still feel concerned about the economy, jobs and the impact on their pockets as higher utility bills start to bite.
But he adds: “Amidst the general gloom the one glimmer of hope is the fact people’s expectations of the future have picked up slightly over the past three months. This could be the spark that kick-starts a wider recovery in confidence later in the year, particularly if interest rates remain unchanged.”
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