Consumer confidence falling
Consumer confidence is falling, according to the Nationwide Consumer Confidence Index, which measured a fall of 12 points to 86 in November – the largest monthly fall ever.
A drop in confidence was not unexpected given continuing uncertainty about the credit crunch, petrol breaching £1 per litre and higher food prices now all seem to be affecting consumers’ sentiment.
Fionnuala Earley, Nationwide’s chief economist, said: “We’ve been expecting consumers to react to the events of recent months for some time so the fall in the index this month was not a surprise. Uncertainty about the effects of the credit crunch together with rising oil and food prices seem to be affecting feelings about jobs and the future economic situation. With this in mind, it is natural that consumers would think about tightening their belts this Christmas and this is reflected in the weaker spending index. Going forward into 2008, the expectation of at least two cuts in the Base Rate should begin to take pressure off finances and restore some confidence.”
Sentiment about the labour market is weaker than in earlier months with almost a quarter of people believing that there are currently few jobs available. The number of people who are confident about buying a major item such as a house or a car also continued to fall in November. Over half (57%) of consumers think now is a bad time to make a major purchase compared to 51% in October.
And house price growth expectations continued on a downward trend, with consumers anticipating just 1.2% growth in prices over the next six months – down from 1.9% in October. This is in line with expectations and is consistent with Nationwide’s forecast of 0% house price inflation in 2008.