Consumers keeping chipper despite the rate rises
Consumer confidence rose in the UK as people shook off the recent interest rate rises – and the prospect of more to come – according to Nationwide Building Society’s consumer confidence index.
The index rose two points to 90, its highest level since October 2006, and Nationwide commented that the figures suggested that UK consumers had come to terms with three recent interest rate rises.
Despite the rises, and the prospect of another hike tomorrow, Nationwide said consumers remained “upbeat” about the future, with no slackening of house prices imminent and the economy continuing to perform well.
“This increase in confidence suggests that consumers have come to terms with the recent interest rate rises,” said Nationwide chief economist Fionnuala Earley.
“But with inflation more than 1% above target, it seems likely that the Bank of England will this week increase rates at least one more time.
“The extent to which this hits consumer confidence will to some extent depend on the impact of falling utility prices this summer against higher debt repayments.”
The Monetary Policy Committee (MPC) at the Bank of England – the body that sets the interest rate – is widely expected to raise the rate by 0.25% tomorrow to 5.5% in a bid to stem inflation.
Despite the positive sentiments expressed in the Nationwide report, some observers feel that another rise in the rates could spell trouble for millions of heavily indebted consumers.