Consumer confidence has slumped to a record low

Aug 6 2008 By Iain Laing, The Journal

CONSUMER confidence tumbled to a further record low in July amid increasing fears that the UK economy could be heading for a recession.

The continued slump in house prices, soaring food and fuel bills and increasing job losses have seen pessimism among consumers surge further, according to Nationwide’s latest survey.

The building society’s consumer confidence index dropped to 51 during the month, down from 61 in June, to reach its lowest level since records began in 2004 for a seventh month in a row.

Overall consumer confidence was 18% lower than a month earlier and 46% below the same period a year ago when the global credit crunch first emerged.

Consumers’ feelings about the current economic situation deteriorated in July after two months of relative stability, Nationwide said.

A record of almost two-thirds of people surveyed, 61%, believe the current climate is bad and 85% are fearful that the situation will be the same or worse in six months’ time.

The proportion of people believing there will be fewer jobs available in six months’ time increased sharply in July to 42%, up from 34% in June, the largest increase so far this year.

Prospects for the ailing housing market, which is suffering the fastest rate of price falls since the early 1990s, also appears bleak with consumers expecting prices to fall by 4.8% in the next six months.

Fionnuala Earley, Nationwide’s chief economist, said: "The continuing downward trend in consumer confidence is not surprising given the recent batch of poor economic data.

"Talk of the increasing chances of a recession, more weakening in the housing market and the continuing rise of food and energy costs will have further dented confidence, as will reports of job losses.

"Falling oil prices and lower fixed mortgage rates offer some good news, but a cut in the bank base rate is still unlikely this summer."

Despite the fears over the wider economy, Nationwide’s report revealed growing numbers of people believe now is a good time to make a major purchase such as a house or a car, rising to 36% from 18% in June – the highest level since July last year.

More people also still think now is a good time to buy household goods, such as furniture or electrical goods, than those believing it is a bad time.