By Marcus Leach
According to the Nationwide Building Society consumer confidence in the UK was at a low ebb in December.
Their Consumer Confidence Index dropped to 38 last month from 40 in November, although it was still above October's record low of 36.
Nationwide blamed the rising cost of living as well as the continuing sovereign debt crisis in the eurozone.
Index falls by two points in December
• The main confidence index fell by two points to 38 in December after a small bounce the previous month
• December’s reading is the second lowest recorded in
the history of the index — the lowest level recorded
being 36 points (October 2011)
• The main index stands 39 points below its long run
Consumer expectations take a knock
• The Expectations Index fell by five points in December to 50
• Consumers’ assessment of the current and future economic situation fell back during the month
Spending confidence more resilient
• Consumers expressed a greater propensity to make household purchases in December, helping to keep the Spending Index stable on 77 points
• Reservations towards making major purchases remain, and consumers expect house prices to fall by 1.3% over the next six months
“Consumer confidence was at a low ebb as 2011 drew to a close, with the main index recording its second lowest reading ever in December," Robert Gardner, Nationwide’s Chief Economist, said.
“While disappointing, the results are not surprising. Right to the end, 2011 was an extremely tough year for UK consumers. With the economy struggling to gain any sort of momentum, labour market conditions became even more challenging in the latter half of the year, with the unemployment rate rising to its highest level for fifteen years.
“At the same time, the cost of living continued to rise at more than twice the rate of underlying wage growth, putting further pressure on household budgets and bearing down on sentiment.
“In December these concerns were likely to have been compounded by events in Europe, with news about the intensifying Eurozone crisis colouring people’s view of the current economic situation and their expectations for the future.
“With the UK recovery unlikely to gain much forward momentum in 2012, we are unlikely to see confidence surge in the near‐term. However, there are some positive developments on the horizon for UK consumers.
“As we move into 2012, inflation should continue to fall back, while interest rates are expected to remain at their current all time low of 0.5% throughout the year. This should help to ease the squeeze on household budgets and help to lift spirits in the coming months.”
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