UK consumer confidence continues to fall

The Nationwide Consumer Confidence Index fell four points to 81 in January - its lowest level since the survey began.

Equity market volatility and a weaker exchange rate may have further affected consumer sentiment, said Nationwide in a statement, which is already feeling the impact of higher food and oil prices, as well as ongoing economic uncertainty.

Consumer sentiment about the economic and employment situation and their income in six months time, reflected in the Expectations Index, shifted in January. The index fell four points from 83 to 79. This was largely driven by a lack of confidence in the number of future jobs available, said Nationwide.

The Present Situation Index (how consumers feel about the current economic and employment situation) fell five points to 83 (from 88 in December). In spite of this, the Spending Index (consumers’ willingness to spend) remained stable in January. However, at 68, it’s still considerably lower than the same time last year (90 in January 2007).

Martin Gahbauer, Nationwide’s senior economist, said: “The continued downward trend in consumer confidence in January is not unexpected in light of current uncertainties about the economic outlook. Sharp falls in share prices, the rising cost of essential items and a weak exchange rate have combined to negatively impact consumer sentiment, which could be a reason for the increased pessimism around the future economic and employment situation. The expected rate cut in February may boost sentiment in the short-term but it will be some time before consumer confidence is back to the levels reported a year ago.”